Question 1

The auditor may discover evidence of kiting by preparing an interbank transfer schedule.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following best describes a fraudulent scheme to overstate cash assets at year-end by recording deposits in transit in both the account from which the cash is withdrawn and the account to which it is transferred?

Accepted Answer

A) Lapping of cash. 
B) Kiting of cash. 
C) Embezzlement of cash. 
D) Restrictive endorsements of cash. 
A) Lapping of cash. 
B) Kiting of cash. 
C) Embezzlement of cash. 
D) Restrictive endorsements of cash. B

Question 3

The reported fair market value of securities held by the client can be verified by the auditor through which of the following procedures?

Accepted Answer

A) Comparing the values to those securities held by the auditing firm. 
B) Confirming the fair values with the client as of the close of the year. 
C) Comparing the fair values with the fair values of similar securities. 
D) Comparing the fair values to credible publications and websites. 
A) Comparing the values to those securities held by the auditing firm. 
B) Confirming the fair values with the client as of the close of the year. 
C) Comparing the fair values with the fair values of similar securities. 
D) Comparing the fair values to credible publications and websites. D

Question 4

Many financial instruments offer a potentially higher return for investors along with a reduced level of risk.

Accepted Answer

A) True 
 B)False

Question 5

An assessment of the client's internal control over cash and marketable securities should take place during the performance of the substantive tests on these accounts.

Accepted Answer

A) True 
 B)False

Question 6

The auditor will send a standard bank confirmation to which of the following?

Accepted Answer

A) Financial institutions of customers using the lockbox. 
B) Financial institutions for which the client has a balance greater than $0 at the end of the year. 
C) Financial institutions with which the client has transacted during the year. 
D) Financial institutions used by significant shareholders. 
A) Financial institutions of customers using the lockbox. 
B) Financial institutions for which the client has a balance greater than $0 at the end of the year. 
C) Financial institutions with which the client has transacted during the year. 
D) Financial institutions used by significant shareholders.

Question 7

Fraud by kiting Describe the concept of kiting and identify the best method for the auditor to use to detect kiting.

Accepted Answer

Kiting involves the transfer of cash fro

Question 8

Which of the following controls would be most successful in mitigating the theft of customer checks received in the mail?

Accepted Answer

A) Custody of receipts by the accounts receivable manager. 
B) Restrictive endorsements placed on checks as soon as they arrive. 
C) Weekly deposits to a secure bank. 
D) Reconciliation of bank accounts each month. 
A) Custody of receipts by the accounts receivable manager. 
B) Restrictive endorsements placed on checks as soon as they arrive. 
C) Weekly deposits to a secure bank. 
D) Reconciliation of bank accounts each month.

Question 9

Which of the following types of securities is valued at amortized cost,subject to an impairment test?

Accepted Answer

A) Held-to-maturity securities. 
B) Available-for-sale securities. 
C) Cash equivalent securities. 
D) Trading securities. 
A) Held-to-maturity securities. 
B) Available-for-sale securities. 
C) Cash equivalent securities. 
D) Trading securities.

Question 10

Assume that an auditor notes a large series of checks that does not clear the bank for an unusually long time after period end.Which of the following would the auditor likely suspect from this observation?

Accepted Answer

A) Vendors are eager to get their payments. 
B) The reconciliation is accurate. 
C) Cash does not exist. 
D) The presence of held checks at period-end. 
A) Vendors are eager to get their payments. 
B) The reconciliation is accurate. 
C) Cash does not exist. 
D) The presence of held checks at period-end.

Question 11

Which of the following situations would normally be discovered by testing the bank reconciliation?

Accepted Answer

A) Failure to bill a customer. 
B) Failure to include a deposit in transit on the bank reconciliation. 
C) Duplicate payment of a vendor's invoice. 
D) Payment to an employee for more hours than she worked. 
A) Failure to bill a customer. 
B) Failure to include a deposit in transit on the bank reconciliation. 
C) Duplicate payment of a vendor's invoice. 
D) Payment to an employee for more hours than she worked.

Question 12

Which of the following would the auditor use to test the existence of investments?

Accepted Answer

A) Footing the schedule of recorded investments. 
B) Confirming or examining recorded investments. 
C) Reviewing a schedule of investments sold during the year. 
D) Recomputing interest and/or gains and losses. 
A) Footing the schedule of recorded investments. 
B) Confirming or examining recorded investments. 
C) Reviewing a schedule of investments sold during the year. 
D) Recomputing interest and/or gains and losses.

Question 13

Auditors usually perform relatively limited substantive analytical procedures for cash accounts and instead focus on substantive tests of details.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a normal edit test as part of computerized control for checks?

Accepted Answer

A) Field checks. 
B) Self-checking digits. 
C) Cross-references. 
D) Reasonableness tests. 
A) Field checks. 
B) Self-checking digits. 
C) Cross-references. 
D) Reasonableness tests.

Question 15

Effective internal control over the cash account requires that the person responsible for making the bank deposit does not post the increase to cash in the accounting system.

Accepted Answer

A) True 
 B)False

Question 16

Because substantive audit procedures are largely ineffective for cash accounts,auditors typically focus on tests of controls when the risk of material misstatement is assessed at a high level.

Accepted Answer

A) True 
 B)False

Question 17

A turnaround document is an effective control because it contains information useful for further processing of a payment received from a customer.

Accepted Answer

A) True 
 B)False

Question 18

The cash account is significant to the auditor for which of the following reasons?

Accepted Answer

A) The cash account balance is the culmination of a large volume of transactions. 
B) The cash account is not as susceptible to fraud as most other accounts. 
C) Cash is the only account that provides opportunity for fraud. 
D) Automated systems do not possess the capability to maintain strong internal controls over cash. 
A) The cash account balance is the culmination of a large volume of transactions. 
B) The cash account is not as susceptible to fraud as most other accounts. 
C) Cash is the only account that provides opportunity for fraud. 
D) Automated systems do not possess the capability to maintain strong internal controls over cash.

Question 19

Gains and losses are not considered by auditors in testing marketable securities,as they do not need to be disclosed.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following describes documents that accompany customer payments to help the clerk identify the payments?

Accepted Answer

A) Receipts such as register tapes. 
B) Accommodation certificates such as authenticated customer tokens. 
C) Turnaround documents such as remittance advices. 
D) Checks stamped with restrictive endorsements such as customer signatures. 
A) Receipts such as register tapes. 
B) Accommodation certificates such as authenticated customer tokens. 
C) Turnaround documents such as remittance advices. 
D) Checks stamped with restrictive endorsements such as customer signatures.

The auditor may discover evidence of kiting by preparing an interbank transfer schedule.

Which of the following best describes a fraudulent scheme to overstate cash assets at year-end by recording deposits in transit in both the account from which the cash is withdrawn and the account to which it is transferred?

The reported fair market value of securities held by the client can be verified by the auditor through which of the following procedures?

Many financial instruments offer a potentially higher return for investors along with a reduced level of risk.

An assessment of the client's internal control over cash and marketable securities should take place during the performance of the substantive tests on these accounts.

The auditor will send a standard bank confirmation to which of the following?

Fraud by kiting Describe the concept of kiting and identify the best method for the auditor to use to detect kiting.

Which of the following controls would be most successful in mitigating the theft of customer checks received in the mail?

Which of the following types of securities is valued at amortized cost,subject to an impairment test?

Assume that an auditor notes a large series of checks that does not clear the bank for an unusually long time after period end.Which of the following would the auditor likely suspect from this observation?

Which of the following situations would normally be discovered by testing the bank reconciliation?

Which of the following would the auditor use to test the existence of investments?

Auditors usually perform relatively limited substantive analytical procedures for cash accounts and instead focus on substantive tests of details.

Which of the following is not a normal edit test as part of computerized control for checks?

Effective internal control over the cash account requires that the person responsible for making the bank deposit does not post the increase to cash in the accounting system.

Because substantive audit procedures are largely ineffective for cash accounts,auditors typically focus on tests of controls when the risk of material misstatement is assessed at a high level.

A turnaround document is an effective control because it contains information useful for further processing of a payment received from a customer.

The cash account is significant to the auditor for which of the following reasons?

Gains and losses are not considered by auditors in testing marketable securities,as they do not need to be disclosed.

Which of the following describes documents that accompany customer payments to help the clerk identify the payments?

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters

Exam 10: Auditing Cash and Marketable Securities

The auditor may discover evidence of kiting by preparing an interbank transfer schedule.

Which of the following best describes a fraudulent scheme to overstate cash assets at year-end by recording deposits in transit in both the account from which the cash is withdrawn and the account to which it is transferred?

The reported fair market value of securities held by the client can be verified by the auditor through which of the following procedures?

Many financial instruments offer a potentially higher return for investors along with a reduced level of risk.

An assessment of the client's internal control over cash and marketable securities should take place during the performance of the substantive tests on these accounts.

The auditor will send a standard bank confirmation to which of the following?

Fraud by kiting Describe the concept of kiting and identify the best method for the auditor to use to detect kiting.

Which of the following controls would be most successful in mitigating the theft of customer checks received in the mail?

Which of the following types of securities is valued at amortized cost,subject to an impairment test?

Assume that an auditor notes a large series of checks that does not clear the bank for an unusually long time after period end.Which of the following would the auditor likely suspect from this observation?

Which of the following situations would normally be discovered by testing the bank reconciliation?

Which of the following would the auditor use to test the existence of investments?

Auditors usually perform relatively limited substantive analytical procedures for cash accounts and instead focus on substantive tests of details.

Which of the following is not a normal edit test as part of computerized control for checks?

Effective internal control over the cash account requires that the person responsible for making the bank deposit does not post the increase to cash in the accounting system.

Because substantive audit procedures are largely ineffective for cash accounts,auditors typically focus on tests of controls when the risk of material misstatement is assessed at a high level.

A turnaround document is an effective control because it contains information useful for further processing of a payment received from a customer.

The cash account is significant to the auditor for which of the following reasons?

Gains and losses are not considered by auditors in testing marketable securities,as they do not need to be disclosed.

Which of the following describes documents that accompany customer payments to help the clerk identify the payments?

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters