Exam 16: Auditing the Financinginvesting Process: Cash and Investments

For each test of transactions and each test of account balances for investments listed below,identify the assertion for which the test provides evidence. 1.Determine whether there has been any permanent impairment in the value of the cost basis of an individual security. 2.Inspect securities if they are maintained by the client or obtain a confirmation from an independent custodian. 3.Search for purchases of securities by examining transactions for a few days after year-end. 4.Examine brokers' advices for a sample of securities purchased during the year.

(Essay)

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Question 41

The general cash account is normally the principal account used to disburse payroll.

(True/False)

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Question 42

An auditor testing long-term investments would ordinarily use substantive analytical procedures as the primary audit evidence to support the reasonableness of the

(Multiple Choice)

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Question 43

In a manufacturing company,which one of the following audit procedures would give the least assurance for the existence of the general ledger balance of investment in stocks and bonds at the audit date?

(Multiple Choice)

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Question 44

The auditor should ordinarily mail confirmation requests to all banks with which the client has conducted any business during the year,regardless of the year-end balance,since

(Multiple Choice)

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Question 45

As one of the year-end audit procedures,the auditor instructed the client's personnel to prepare a standard bank confirmation request for a bank account that had been closed during the year.After the client's treasurer had signed the request,it was mailed to the bank by the assistant treasurer.What is the major flaw in this audit procedure?

(Multiple Choice)

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Question 46

Jones was engaged to examine the financial statements of Virginia Corporation for the year ended June 30.Having completed an examination of the investment securities,which of the following is the best method of verifying the accuracy of recorded dividend income?

(Multiple Choice)

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Question 47

An imprest cash account is

(Multiple Choice)

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Question 48

An imprest cash account is used for specific purposes and generally maintains a very small balance.

(True/False)

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Question 49

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

(Essay)

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Question 50

An unrecorded check issued during the last week of the year would most likely be discovered by the auditor when the

(Multiple Choice)

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Question 51

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

(Multiple Choice)

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Question 52

Which of the following procedures most likely would give the greatest assurance that securities held as investments are safeguarded?

(Multiple Choice)

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Question 53

The auditor should insist that a representative of the client be present during the physical examination of securities in order to

(Multiple Choice)

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Question 54

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

(Essay)

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Question 55

A primary purpose of the proof of cash is to

(Multiple Choice)

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Question 56

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

The initiation function is separate from the final approval function

An individual can make fictitious transactions

The valuation-monitoring function is separate from the acquisition function

An individual can improperly record securities values or not report the values to management

Custody of the securities is separate from accounting for the securities

An individual can conceal any defalcation that would normally be detected by reconciliation of subsidiary records with general ledger control accounts

Correct Answer:

Verified

The initiation function is separate from the final approval function

The valuation-monitoring function is separate from the acquisition function

Custody of the securities is separate from accounting for the securities

The maintenance of the securities ledger is separate from that of the general ledger

(Matching)

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Question 57

In confirming with an outside agent,such as a financial institution,that the agent is holding investment securities in the client's name,an auditor most likely gathers evidence in support of management's financial statement assertions regarding

(Multiple Choice)

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Question 58

The least crucial element of internal control over cash is

(Multiple Choice)

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Question 59

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

(Essay)

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Question 60

Showing 41 - 60 of 70

The general cash account is normally the principal account used to disburse payroll.

An auditor testing long-term investments would ordinarily use substantive analytical procedures as the primary audit evidence to support the reasonableness of the

In a manufacturing company,which one of the following audit procedures would give the least assurance for the existence of the general ledger balance of investment in stocks and bonds at the audit date?

The auditor should ordinarily mail confirmation requests to all banks with which the client has conducted any business during the year,regardless of the year-end balance,since

Jones was engaged to examine the financial statements of Virginia Corporation for the year ended June 30.Having completed an examination of the investment securities,which of the following is the best method of verifying the accuracy of recorded dividend income?

An imprest cash account is

An imprest cash account is used for specific purposes and generally maintains a very small balance.

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

An unrecorded check issued during the last week of the year would most likely be discovered by the auditor when the

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

Which of the following procedures most likely would give the greatest assurance that securities held as investments are safeguarded?

The auditor should insist that a representative of the client be present during the physical examination of securities in order to

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

A primary purpose of the proof of cash is to

In confirming with an outside agent,such as a financial institution,that the agent is holding investment securities in the client's name,an auditor most likely gathers evidence in support of management's financial statement assertions regarding

The least crucial element of internal control over cash is

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

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

Assurance,Attestation,and Internal Auditing Services

Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

Auditing the Financinginvesting 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

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