Question 1

Explain the importance of the bank reconciliation to the audit and list some of the items found on the reconciliation.

Accepted Answer

The completion of a monthly bank reconci

Question 2

Which of the following audit procedures is the most appropriate when internal control over cash is weak or when an entity requests an investigation of cash transactions?

Accepted Answer

A)  Proof of cash. 
B)  Bank reconciliation. 
C)  Cash confirmation. 
D)  Evaluate ratio of cash to current liabilities. 
A)  Proof of cash. 
B)  Bank reconciliation. 
C)  Cash confirmation. 
D)  Evaluate ratio of cash to current liabilities.

Question 3

Auditors will need to perform more substantive tests than normal to obtain sufficient appropriate evidence that a financial instrument is fairly stated if which of the following conditions exist?

Accepted Answer

A)  Management is objective and transparent in their assumptions. 
B)  Management's key assumptions are subject to volatility. 
C)  The entity's portfolio is composed of only stocks issued by Fortune 100 firms traded in an active market. 
D)  The entity does not have control weaknesses in its valuation processes. 
A)  Management is objective and transparent in their assumptions. 
B)  Management's key assumptions are subject to volatility. 
C)  The entity's portfolio is composed of only stocks issued by Fortune 100 firms traded in an active market. 
D)  The entity does not have control weaknesses in its valuation processes.

Question 4

A company holds bearer bonds as a short-term investment. Responsibility for custody of these bonds and submission of coupons for collections of periodic interest probably should be delegated to the

Accepted Answer

A)  Chief Accountant. 
B)  Internal Auditor. 
C)  Cashier. 
D)  Treasurer. 
A)  Chief Accountant. 
B)  Internal Auditor. 
C)  Cashier. 
D)  Treasurer.

Question 5

Which of the following controls would a company most likely use to safeguard marketable securities when an independent trust agent is not employed?

Accepted Answer

A)  The investment committee of the board of directors periodically reviews the investment decisions delegated to the treasurer. 
B)  Two company officials must be present to access marketable securities, which are kept in a bank safe-deposit box. 
C)  The internal auditor and the controller independently trace all purchases and sales of marketable securities from the subsidiary ledgers to the general ledger. 
D)  The chairman of the board verifies the marketable securities, which are kept in a bank safe-deposit box, each year on the balance sheet date. 
A)  The investment committee of the board of directors periodically reviews the investment decisions delegated to the treasurer. 
B)  Two company officials must be present to access marketable securities, which are kept in a bank safe-deposit box. 
C)  The internal auditor and the controller independently trace all purchases and sales of marketable securities from the subsidiary ledgers to the general ledger. 
D)  The chairman of the board verifies the marketable securities, which are kept in a bank safe-deposit box, each year on the balance sheet date.

Question 6

Examining brokers' advices for a sample of securities purchased during the year is a test for the assertion of

Accepted Answer

A)  Completeness. 
B)  Disclosure. 
C)  Valuation and allocation. 
D)  Rights and obligations. 
A)  Completeness. 
B)  Disclosure. 
C)  Valuation and allocation. 
D)  Rights and obligations.

Question 7

Examining a sample of cancelled checks for an authorized signature tests which of the following assertions for cash?

Accepted Answer

A)  Authorization. 
B)  Completeness. 
C)  Cutoff. 
D)  Accuracy. 
A)  Authorization. 
B)  Completeness. 
C)  Cutoff. 
D)  Accuracy.

Question 8

Which of the following pairs of accounts would an auditor most likely analyze on the same working paper?

Accepted Answer

A)  Notes receivable and interest income. 
B)  Accrued interest receivable and accrued interest payable. 
C)  Notes payable and notes receivable. 
D)  Interest income and interest expense. 
A)  Notes receivable and interest income. 
B)  Accrued interest receivable and accrued interest payable. 
C)  Notes payable and notes receivable. 
D)  Interest income and interest expense.

Question 9

Of the following, which is the most efficient audit procedure for verification of interest earned on bond investments?

Accepted Answer

A)  Tracing interest declarations to an independent record book. 
B)  Recomputing interest earned using the interest rate and bond amount. 
C)  Confirming the interest rate with the issuer of the bonds. 
D)  Vouching the receipt and deposit of interest checks. 
A)  Tracing interest declarations to an independent record book. 
B)  Recomputing interest earned using the interest rate and bond amount. 
C)  Confirming the interest rate with the issuer of the bonds. 
D)  Vouching the receipt and deposit of interest checks.

Question 10

An interbank transfer schedule

Accepted Answer

A)  Is another name for the proof of cash. 
B)  Helps the auditor test for kiting. 
C)  Is on a standard bank confirmation. 
D)  Is used to examine entity bank reconciliations. 
A)  Is another name for the proof of cash. 
B)  Helps the auditor test for kiting. 
C)  Is on a standard bank confirmation. 
D)  Is used to examine entity bank reconciliations.

Question 11

When an auditor is unable to inspect and count an entity's investment securities until after the balance sheet date, the bank where the securities are held in a safe-deposit box should be notified on or before the balance sheet date that it will be asked to

Accepted Answer

A)  Verify any differences between the contents of the box and the balances in the entity's subsidiary ledger. 
B)  Provide a list of securities added and removed from the box between the balance sheet date and the security-count date. 
C)  Confirm that there has been no access to the box between the balance sheet date and the security-count date. 
D)  Count the securities in the box so that the auditor will have an independent direct verification. 
A)  Verify any differences between the contents of the box and the balances in the entity's subsidiary ledger. 
B)  Provide a list of securities added and removed from the box between the balance sheet date and the security-count date. 
C)  Confirm that there has been no access to the box between the balance sheet date and the security-count date. 
D)  Count the securities in the box so that the auditor will have an independent direct verification.

Question 12

Which of the following control activities would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments?

Accepted Answer

A)  Senior management verifies that securities in the bank safe-deposit box are registered in the entity's name. 
B)  The internal auditor compares the securities in the bank safe-deposit box with recorded investments. 
C)  The treasurer vouches the acquisition of securities by comparing brokers' advices with canceled checks. 
D)  The controller compares the current market prices of recorded investments with the brokers' advices on file. 
A)  Senior management verifies that securities in the bank safe-deposit box are registered in the entity's name. 
B)  The internal auditor compares the securities in the bank safe-deposit box with recorded investments. 
C)  The treasurer vouches the acquisition of securities by comparing brokers' advices with canceled checks. 
D)  The controller compares the current market prices of recorded investments with the brokers' advices on file.

Question 13

The cash account is affected by all of the entity's business processes.

Accepted Answer

A) True 
 B)False

Question 14

An auditor should trace interbank transfers for the last part of the audit period and first part of the subsequent period to detect whether

Accepted Answer

A)  The cash receipts journal was held open for a few days after the year-end. 
B)  The last checks recorded before the year end were actually mailed by the year-end. 
C)  Cash balances were overstated because of kiting. 
D)  Any unusual payments to or receipts from related parties occurred. 
A)  The cash receipts journal was held open for a few days after the year-end. 
B)  The last checks recorded before the year end were actually mailed by the year-end. 
C)  Cash balances were overstated because of kiting. 
D)  Any unusual payments to or receipts from related parties occurred.

Question 15

To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor most likely would

Accepted Answer

A)  Inspect the stock certificates evidencing the investment. 
B)  Examine the audited financial statements of the investee company. 
C)  Review the broker's advice or canceled check for the investment's acquisition. 
D)  Obtain market quotations from financial newspapers or periodicals. 
A)  Inspect the stock certificates evidencing the investment. 
B)  Examine the audited financial statements of the investee company. 
C)  Review the broker's advice or canceled check for the investment's acquisition. 
D)  Obtain market quotations from financial newspapers or periodicals.

Question 16

What are the factors that must be considered to determine if a permanent decline in the value of an investment security has occurred?

Accepted Answer

The auditor must determine if there has

Question 17

To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except the:

Accepted Answer

A)  Cutoff bank statement. 
B)  Year-end bank statement. 
C)  Bank confirmation. 
D)  General ledger. 
A)  Cutoff bank statement. 
B)  Year-end bank statement. 
C)  Bank confirmation. 
D)  General ledger.

Question 18

A cutoff bank statement is used to verify the propriety of the reconciling items shown on the bank reconciliation.

Accepted Answer

A) True 
 B)False

Question 19

You are auditing cash for Moonbeam, Inc. In meeting with the CFO during the planning stages of the audit, she indicated that there was a high risk of misstatement due to fraud in the cash account, given the lack of proper segregation of duties. As the auditor, what tests could you perform to detect fraudulent activities in the cash account?

Accepted Answer

There are three tests used for detecting

Question 20

Match the segregation of duties for investments with the misstatement (due to error or fraud) it can help prevent.

Accepted Answer

The answer of Match the segregation of duties for investments...

Explain the importance of the bank reconciliation to the audit and list some of the items found on the reconciliation.

Which of the following audit procedures is the most appropriate when internal control over cash is weak or when an entity requests an investigation of cash transactions?

Auditors will need to perform more substantive tests than normal to obtain sufficient appropriate evidence that a financial instrument is fairly stated if which of the following conditions exist?

A company holds bearer bonds as a short-term investment. Responsibility for custody of these bonds and submission of coupons for collections of periodic interest probably should be delegated to the

Which of the following controls would a company most likely use to safeguard marketable securities when an independent trust agent is not employed?

Examining brokers' advices for a sample of securities purchased during the year is a test for the assertion of

Examining a sample of cancelled checks for an authorized signature tests which of the following assertions for cash?

Which of the following pairs of accounts would an auditor most likely analyze on the same working paper?

Of the following, which is the most efficient audit procedure for verification of interest earned on bond investments?

An interbank transfer schedule

When an auditor is unable to inspect and count an entity's investment securities until after the balance sheet date, the bank where the securities are held in a safe-deposit box should be notified on or before the balance sheet date that it will be asked to

Which of the following control activities would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments?

The cash account is affected by all of the entity's business processes.

An auditor should trace interbank transfers for the last part of the audit period and first part of the subsequent period to detect whether

To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor most likely would

What are the factors that must be considered to determine if a permanent decline in the value of an investment security has occurred?

To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except the:

A cutoff bank statement is used to verify the propriety of the reconciling items shown on the bank reconciliation.

Match the segregation of duties for investments with the misstatement (due to error or fraud) it can help prevent.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters

Exam 16: Auditing the Financinginvesting Process: Cash and Investments

Explain the importance of the bank reconciliation to the audit and list some of the items found on the reconciliation.

Which of the following audit procedures is the most appropriate when internal control over cash is weak or when an entity requests an investigation of cash transactions?

Auditors will need to perform more substantive tests than normal to obtain sufficient appropriate evidence that a financial instrument is fairly stated if which of the following conditions exist?

A company holds bearer bonds as a short-term investment. Responsibility for custody of these bonds and submission of coupons for collections of periodic interest probably should be delegated to the

Which of the following controls would a company most likely use to safeguard marketable securities when an independent trust agent is not employed?

Examining brokers' advices for a sample of securities purchased during the year is a test for the assertion of

Examining a sample of cancelled checks for an authorized signature tests which of the following assertions for cash?

Which of the following pairs of accounts would an auditor most likely analyze on the same working paper?

Of the following, which is the most efficient audit procedure for verification of interest earned on bond investments?

An interbank transfer schedule

When an auditor is unable to inspect and count an entity's investment securities until after the balance sheet date, the bank where the securities are held in a safe-deposit box should be notified on or before the balance sheet date that it will be asked to

Which of the following control activities would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments?

The cash account is affected by all of the entity's business processes.

An auditor should trace interbank transfers for the last part of the audit period and first part of the subsequent period to detect whether

To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor most likely would

What are the factors that must be considered to determine if a permanent decline in the value of an investment security has occurred?

To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except the:

A cutoff bank statement is used to verify the propriety of the reconciling items shown on the bank reconciliation.

Match the segregation of duties for investments with the misstatement (due to error or fraud) it can help prevent.

An Introduction to Assurance and Financial Statement Auditing

The Financial Statement Auditing Environment

Audit Planning, Types of Audit Tests, and Materiality

Risk Assessment

Evidence and Documentation

Internal Control in a Financial Statement Audit

Auditing Internal Control Over Financial Reporting

Audit Sampling: An Overview and Application to Tests of Controls

Audit Sampling: An Application to Substantive Tests of Account Balances

Auditing the Revenue Process

Auditing the Purchasing Process

Auditing the Human Resource Management Process

Auditing the Inventory Management Process

Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

Auditing the Financing Investing Process: Long-Term Liabilities Stockholders Equity and Income Statement Accounts

Completing the Audit Engagement

Reports on Audited Financial Statements

Professional Conduct, Independence, and Quality Control

Legal Liability

Assurance, Attestation, and Internal Auditing Services

Filters