Exam 10: Cash and Financial Investments

An auditor's analytical procedures have revealed that the accounts receivable of a client have doubled since the end of the prior year.However,the allowance for doubtful accounts,as a percentage of accounts receivable remained about the same.Which of the following client explanations most likely would satisfy the auditor?

An auditor compares annual revenues and expenses with similar amounts from the prior year and investigates all changes exceeding 10%.This procedure most likely could indicate that

Flemco has made a series of transfers between bank accounts near year-end,some through inter-bank wired transfers and some through checks.You have audited the wired transfers and agree that they have been properly stated and now have the following schedule of transfers between cash accounts made using checks.You may assume that dates per bank are correct,and that dates per books are the dates the transactions were recorded in the books. Bank accounts Date disbursed per: Date deposited per: Check From To Amount Books Books Bank number 4040 lst Nat. Suburban \ 112,000 12/31 1/5 1/3 1/3 3270 Valley Midburg 62,500 12/31 1/3 12/31 12/31 4041 1st Nat. Capital 121,000 1/2 1/4 12/31 1/3 3271 Valley Suburban 16,500 1/3 1/5 1/3 12/30 0700 Midburg Suburban 15,800 12/30 1/5 12/30 1/3 Analyze each of the above transfers and determine whether you believe each causes total cash to most likely be correct,overstated,or understated as of year-end.

Which of the following controls would be most likely to reduce the risk of diversion of customer receipts by a company's employees?

The auditors use a bank cutoff statement to compare:

Which procedure is an auditor most likely to use to detect a check outstanding at year-end that was not recorded as outstanding on the year-end bank reconciliation?

Which of the following is one of the better auditing techniques that might be used by an auditor to detect kiting?

Lapping of accounts receivable by an employee is not possible when there is adequate segregation of duties with respect to cash disbursements.

Which of the following is not confirmed on the standard form used for cash balances at financial institutions?

For investments in securities accounted for by the equity method,the auditors are primarily concerned with verifying the market value of the investments.

When a client engages in transactions involving derivatives,the auditor should

Kiting would least likely be detected by:

By preparing a four-column bank reconciliation ("proof of cash")for the last month of the year,an auditor will generally be able to detect:

By preparing a four-column bank reconciliation ("proof of cash")at year-end,an auditor will generally not be able to detect:

The auditors should count small petty cash funds at year-end to make sure that balance is not understated on the financial statements.

The auditors compare information on canceled checks with information contained in the cash disbursement journal.The objective of this test is to determine that:

Which of the following statements is not correct?

Mailroom personnel of a company should prepare a control listing of incoming cash receipts and deposit them intact daily.

Which of the following cash transfers is most likely to result in a misstatement of cash at December 31,19X7? Bank Transfer Schedule Disbursement Receipt A) 12/31/7 1/4/8 12/31/7 12/31/7 B) 1/4/8 1/5/8 12/31/7 1/4/8 C) 12/31/7 1/5/8 12/31/7 1/4/8 D) 1/4/8 1/11/8 1/4/8 1/4/8

For purposes of an audit of financial statements,electronic confirmation of cash balances