Question 1

The use of unobservable inputs such as a pricing model or discounted cash flow is an example of a level ________ estimate.

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  1 and 3 
A)  1 
B)  2 
C)  3 
D)  1 and 3

Question 2

Which of the following statements is correct?

Accepted Answer

A)  Auditors must obtain bank confirmations for audits of non-public entities. 
B)  Auditors are required to obtain bank confirmations under international auditing standards. 
C)  Auditing standards do not address specific requirements regarding bank confirmations. 
D)  Auditing standards do not require bank confirmations. 
A)  Auditors must obtain bank confirmations for audits of non-public entities. 
B)  Auditors are required to obtain bank confirmations under international auditing standards. 
C)  Auditing standards do not address specific requirements regarding bank confirmations. 
D)  Auditing standards do not require bank confirmations.

Question 3

An imprest petty cash fund would least likely be used to pay for which of the following items?

Accepted Answer

A)  Minor office supplies 
B)  Monthly interest expense 
C)  Stamps for small mailings 
D)  Small contributions to a local charity 
A)  Minor office supplies 
B)  Monthly interest expense 
C)  Stamps for small mailings 
D)  Small contributions to a local charity

Question 4

The following information applies to the questions below:
Listed below are four interbank cash transfers, indicated by the numbers 1, 2, 3, and 4, of a client for late December 2013 and early January 2014:  
-Based on the schedule of interbank transfers above,which of the cash transfers indicates an error in cash cutoff at December 31,2013?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 5

To test the client's list of outstanding checks on the bank reconciliation for completeness,the auditor should trace from the list to the checks included with the cutoff bank statement.

Accepted Answer

A) True 
 B)False

Question 6

Completeness is an important objective for derivative financial instruments.

Accepted Answer

A) True 
 B)False

Question 7

Tests related to realizable value will vary according to the type of security and the associated accounting standard.

Accepted Answer

A) True 
 B)False

Question 8

Cutoff is more important in testing transactions as a client may want to record a gain or a loss on the sale at the end of the year.

Accepted Answer

A) True 
 B)False

Question 9

Level ________ estimates use observable inputs other than quoted prices.

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 10

Prices in an active market for identical assets is a level ________fair value estimate.

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 11

The test of details of balances procedure that requires the auditor to foot the outstanding check list and deposits in transit is an attempt to satisfy which audit objective?

Accepted Answer

A)  Cutoff 
B)  Presentation and disclosure 
C)  Detail tie-in 
D)  Completeness 
A)  Cutoff 
B)  Presentation and disclosure 
C)  Detail tie-in 
D)  Completeness

Question 12

When auditing financial instruments ,a confirmation is sent to the broker-dealer:

Accepted Answer

A)  only if the client has poor internal controls. 
B)  to confirm interest and dividends. 
C)  to provide assurance on realizable value. 
D)  to confirm year-end holdings. 
A)  only if the client has poor internal controls. 
B)  to confirm interest and dividends. 
C)  to provide assurance on realizable value. 
D)  to confirm year-end holdings.

Question 13

The most important balance-related audit objectives in the audit of cash include all but which of the following?

Accepted Answer

A)  Existence 
B)  Accuracy 
C)  Completeness 
D)  Occurrence 
A)  Existence 
B)  Accuracy 
C)  Completeness 
D)  Occurrence

Question 14

The auditor is generally concerned about the realizable value and the rights to cash.

Accepted Answer

A) True 
 B)False

Question 15

An auditor is reviewing the minutes of board meetings to determine whether any securities are pledged as collateral.This test of the detail of balances relates to the audit objective of:

Accepted Answer

A)  rights. 
B)  cutoff. 
C)  realizable value. 
D)  classification. 
A)  rights. 
B)  cutoff. 
C)  realizable value. 
D)  classification.

Question 16

Analytical procedures may be used to assess the year-end balances for financial instruments.

Accepted Answer

A) True 
 B)False

Question 17

The client may mail the bank confirmation requests if the auditor believes doing so will increase the likelihood that the confirmation will be returned promptly.

Accepted Answer

A) True 
 B)False

Question 18

When auditing the year-end cash balance,one of the areas of focus is on the accuracy objective.

Accepted Answer

A) True 
 B)False

Question 19

A proof of cash includes four reconciliation tasks.List below two of those tasks.

Accepted Answer

1.Reconcile the balance on the bank stat

Question 20

Level 1 estimates require more management judgment than level 2 or level 3 estimates.

Accepted Answer

A) True 
 B)False

Exam 23: Audit of Cash and Financial Instruments

The use of unobservable inputs such as a pricing model or discounted cash flow is an example of a level ________ estimate.

Which of the following statements is correct?

An imprest petty cash fund would least likely be used to pay for which of the following items?

To test the client's list of outstanding checks on the bank reconciliation for completeness,the auditor should trace from the list to the checks included with the cutoff bank statement.

Completeness is an important objective for derivative financial instruments.

Tests related to realizable value will vary according to the type of security and the associated accounting standard.

Cutoff is more important in testing transactions as a client may want to record a gain or a loss on the sale at the end of the year.

Level ________ estimates use observable inputs other than quoted prices.

Prices in an active market for identical assets is a level ________fair value estimate.

The test of details of balances procedure that requires the auditor to foot the outstanding check list and deposits in transit is an attempt to satisfy which audit objective?

When auditing financial instruments ,a confirmation is sent to the broker-dealer:

The most important balance-related audit objectives in the audit of cash include all but which of the following?

The auditor is generally concerned about the realizable value and the rights to cash.

An auditor is reviewing the minutes of board meetings to determine whether any securities are pledged as collateral.This test of the detail of balances relates to the audit objective of:

Analytical procedures may be used to assess the year-end balances for financial instruments.

The client may mail the bank confirmation requests if the auditor believes doing so will increase the likelihood that the confirmation will be returned promptly.

When auditing the year-end cash balance,one of the areas of focus is on the accuracy objective.

A proof of cash includes four reconciliation tasks.List below two of those tasks.

Level 1 estimates require more management judgment than level 2 or level 3 estimates.

The Assurance Services Market

The Audit Standards Setting Process

Audit Reports

Legal Liability Considerations for Auditors

Ethics and the Audit Profession

Audit Responsibilities and Objectives

Nature and Type of Audit Evidence

Audit Planning

Considering Materiality and Audit Risk

Considering Internal Control

Considering the Risk of Fraud

Implications of Information Technology for the Audit Process

Developing the Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Inventory and Warehousing Cycle

Audit of the Payroll and Personnel Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit Completion

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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