Question 1

Interbank transfer schedules are used by the auditor to address which of the following concerns?

Accepted Answer

A) Lapping. 
B) Kiting. 
C) Embezzlement by omitting outstanding checks on reconciliation. 
D) All of the above. 
A) Lapping. 
B) Kiting. 
C) Embezzlement by omitting outstanding checks on reconciliation. 
D) All of the above.

Question 2

When testing cash balances at the balance sheet date,the auditor foots the bank reconciliation and traces its reported book balance to the trial balance and its bank balance to the standard confirmation.Which of the following assertions is being tested with these procedures?

Accepted Answer

A) Rights. 
B) Valuation. 
C) Existence. 
D) All of the above. 
A) Rights. 
B) Valuation. 
C) Existence. 
D) All of the above.

Question 3

Which of the following is the primary reason the auditor obtains and reviews a cutoff bank statement?

Accepted Answer

A) Verify the balance of cash per the bank's general ledger at the balance sheet date. 
B) Verify the reconciling items on the year-end bank reconciliation. 
C) Test for intentional lapping of bank transfers. 
D) Foot the cutoff bank statement for completeness. 
A) Verify the balance of cash per the bank's general ledger at the balance sheet date. 
B) Verify the reconciling items on the year-end bank reconciliation. 
C) Test for intentional lapping of bank transfers. 
D) Foot the cutoff bank statement for completeness.

Question 4

The standard bank confirmation includes the confirmation of cash accounts but not liabilities with financial institutions.

Accepted Answer

A) True 
 B)False

Question 5

The existence or occurrence assertion as related to cash is concerned with proper classification on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 6

A risk of fraud is not associated with petty cash funds because of the small amounts of money involved.

Accepted Answer

A) True 
 B)False

Question 7

The auditor obtains the current market value of marketable securities by confirmation with the holder of the security.

Accepted Answer

A) True 
 B)False

Question 8

A lockbox is a mailbox type of depository device that is located in front of the client's premises,allowing customers to remit payment in a timely manner.

Accepted Answer

A) True 
 B)False

Question 9

Investments in securities are classified as which of the following?

Accepted Answer

A) Held-to-maturity. 
B) Trading securities. 
C) Available-for-sale securities. 
D) All of the above. 
A) Held-to-maturity. 
B) Trading securities. 
C) Available-for-sale securities. 
D) All of the above.

Question 10

All marketable securities are carried at fair market value on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 11

The ease with which cash can be stolen is most related to which of the following risks?

Accepted Answer

A) Control risk. 
B) Inherent risk. 
C) Detection risk. 
D) Liquidity risk. 
A) Control risk. 
B) Inherent risk. 
C) Detection risk. 
D) Liquidity risk.

Question 12

Periodic bank reconciliations should be performed by the individual who makes the client's bank deposits.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following would be used by the auditor to address the possibility of kiting?

Accepted Answer

A) Cut-off bank reconciliations. 
B) Interbank transfer schedules. 
C) Bank confirmations of account balances. 
D) Bank confirmations of loan guarantees. 
A) Cut-off bank reconciliations. 
B) Interbank transfer schedules. 
C) Bank confirmations of account balances. 
D) Bank confirmations of loan guarantees.

Question 14

Which of the following is a cash management technique frequently used by management?

Accepted Answer

A) Cash management agreement with financial institutions. 
B) Lockboxes. 
C) Electronic funds transfers. 
D) All of the above. 
A) Cash management agreement with financial institutions. 
B) Lockboxes. 
C) Electronic funds transfers. 
D) All of the above.

Question 15

Skimming occurs when an employee makes a sale but does not record it and steals the cash.

Accepted Answer

A) True 
 B)False

Question 16

Auditors test the assertion of completeness by determining if any restrictions on the use of commercial paper by an entity are disclosed in the footnotes.

Accepted Answer

A) True 
 B)False

Question 17

During the testing of a year-end bank reconciliation,an auditor noticed that the majority of checks listed as outstanding at year-end did not clear the bank until the middle of the subsequent month.Which of the following is a likely explanation?

Accepted Answer

A) A high probability of kiting. 
B) A high probability of lapping. 
C) The year-end cash disbursements records had been closed prior to year-end. 
D) Checks were issued before year-end but not mailed until the subsequent period. 
A) A high probability of kiting. 
B) A high probability of lapping. 
C) The year-end cash disbursements records had been closed prior to year-end. 
D) Checks were issued before year-end but not mailed until the subsequent period.

Question 18

In assessing risk relating to fraud,auditors brainstorm about potential fraud risks.

Accepted Answer

A) True 
 B)False

Question 19

Commercial paper is the term applied to notes issued by major corporations with poor credit ratings.

Accepted Answer

A) True 
 B)False

Question 20

Kiting is an example of a technique used to intentionally overstate cash.

Accepted Answer

A) True 
 B)False

Interbank transfer schedules are used by the auditor to address which of the following concerns?

When testing cash balances at the balance sheet date,the auditor foots the bank reconciliation and traces its reported book balance to the trial balance and its bank balance to the standard confirmation.Which of the following assertions is being tested with these procedures?

Which of the following is the primary reason the auditor obtains and reviews a cutoff bank statement?

The standard bank confirmation includes the confirmation of cash accounts but not liabilities with financial institutions.

The existence or occurrence assertion as related to cash is concerned with proper classification on the balance sheet.

A risk of fraud is not associated with petty cash funds because of the small amounts of money involved.

The auditor obtains the current market value of marketable securities by confirmation with the holder of the security.

A lockbox is a mailbox type of depository device that is located in front of the client's premises,allowing customers to remit payment in a timely manner.

Investments in securities are classified as which of the following?

All marketable securities are carried at fair market value on the balance sheet.

The ease with which cash can be stolen is most related to which of the following risks?

Periodic bank reconciliations should be performed by the individual who makes the client's bank deposits.

Which of the following would be used by the auditor to address the possibility of kiting?

Which of the following is a cash management technique frequently used by management?

Skimming occurs when an employee makes a sale but does not record it and steals the cash.

Auditors test the assertion of completeness by determining if any restrictions on the use of commercial paper by an entity are disclosed in the footnotes.

During the testing of a year-end bank reconciliation,an auditor noticed that the majority of checks listed as outstanding at year-end did not clear the bank until the middle of the subsequent month.Which of the following is a likely explanation?

In assessing risk relating to fraud,auditors brainstorm about potential fraud risks.

Commercial paper is the term applied to notes issued by major corporations with poor credit ratings.

Kiting is an example of a technique used to intentionally overstate cash.

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

Interbank transfer schedules are used by the auditor to address which of the following concerns?

When testing cash balances at the balance sheet date,the auditor foots the bank reconciliation and traces its reported book balance to the trial balance and its bank balance to the standard confirmation.Which of the following assertions is being tested with these procedures?

Which of the following is the primary reason the auditor obtains and reviews a cutoff bank statement?

The standard bank confirmation includes the confirmation of cash accounts but not liabilities with financial institutions.

The existence or occurrence assertion as related to cash is concerned with proper classification on the balance sheet.

A risk of fraud is not associated with petty cash funds because of the small amounts of money involved.

The auditor obtains the current market value of marketable securities by confirmation with the holder of the security.

A lockbox is a mailbox type of depository device that is located in front of the client's premises,allowing customers to remit payment in a timely manner.

Investments in securities are classified as which of the following?

All marketable securities are carried at fair market value on the balance sheet.

The ease with which cash can be stolen is most related to which of the following risks?

Periodic bank reconciliations should be performed by the individual who makes the client's bank deposits.

Which of the following would be used by the auditor to address the possibility of kiting?

Which of the following is a cash management technique frequently used by management?

Skimming occurs when an employee makes a sale but does not record it and steals the cash.

Auditors test the assertion of completeness by determining if any restrictions on the use of commercial paper by an entity are disclosed in the footnotes.

During the testing of a year-end bank reconciliation,an auditor noticed that the majority of checks listed as outstanding at year-end did not clear the bank until the middle of the subsequent month.Which of the following is a likely explanation?

In assessing risk relating to fraud,auditors brainstorm about potential fraud risks.

Commercial paper is the term applied to notes issued by major corporations with poor credit ratings.

Kiting is an example of a technique used to intentionally overstate cash.

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