Question 1

Under which of the following circumstances would the valuation assertion for cash most likely have an increased level of inherent risk?

Accepted Answer

A) Client has cash holdings in foreign currency in a politically unstable country. 
B) Client has cash holdings in multiple U.S.financial institutions over a wide geographic area. 
C) Client holds investments in complex financial instruments. 
D) All of the above. 
A) Client has cash holdings in foreign currency in a politically unstable country. 
B) Client has cash holdings in multiple U.S.financial institutions over a wide geographic area. 
C) Client holds investments in complex financial instruments. 
D) All of the above.

Question 2

Independent reconciliations of bank statement balances with the balance on the books should identify misstatements and any unusual banking activity.

Accepted Answer

A) True 
 B)False

Question 3

The audit of the cash account is inherently risky due to volume of activity,liquidity,and the account's susceptibility to fraud.

Accepted Answer

A) True 
 B)False

Question 4

The standard bank confirmation is used by the auditor to test for lapping.

Accepted Answer

A) True 
 B)False

Question 5

How will the auditor most likely utilize the bank reconciliation as evidence in the audit of cash?

Accepted Answer

A) The auditor sends the reconciliation to the bank for independent verification. 
B) The auditor performs the reconciliation for the client to record the proper cash balance. 
C) The auditor traces the book balance of the reconciliation to the cutoff bank statement. 
D) The auditor tests deposits in transit and outstanding items to other corroborating evidence. 
A) The auditor sends the reconciliation to the bank for independent verification. 
B) The auditor performs the reconciliation for the client to record the proper cash balance. 
C) The auditor traces the book balance of the reconciliation to the cutoff bank statement. 
D) The auditor tests deposits in transit and outstanding items to other corroborating evidence.

Question 6

Cash and cash equivalents reported on the balance sheet may include debt securities that mature less than six months from the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is the most relevant assertion with regards to the audit of cash?

Accepted Answer

A) Existence 
B) Rights and obligations. 
C) Valuation and allocation. 
D) Presentation and disclosure. 
A) Existence 
B) Rights and obligations. 
C) Valuation and allocation. 
D) Presentation and disclosure.

Question 8

Which of the following represents a typical substantive audit procedure for cash balances?

Accepted Answer

A) Verify material deposits in transit to subsequent statements. 
B) Review cash confirmations received by the client from the bank. 
C) Foot cutoff bank statements provided by the financial institutions. 
D) Perform kiting techniques to transfer cash between two client accounts. 
A) Verify material deposits in transit to subsequent statements. 
B) Review cash confirmations received by the client from the bank. 
C) Foot cutoff bank statements provided by the financial institutions. 
D) Perform kiting techniques to transfer cash between two client accounts.

Question 9

The cutoff statement is mailed to the client for an agreed-upon date and then copied for the audit files.

Accepted Answer

A) True 
 B)False

Question 10

Auditing marketable securities - assertions Identify at least eight sources of evidence and testing the auditor may use in the audit of marketable securities by major assertion tested.

Accepted Answer

The auditor may use the following source

Question 11

Which of the following is not a common test of controls for marketable securities?

Accepted Answer

A) Review the minutes of the board meetings. 
B) Review broker's advice for accurate recording of security. 
C) Inquire of management about its process for reclassifications. 
D) Review reports of internal audits. 
A) Review the minutes of the board meetings. 
B) Review broker's advice for accurate recording of security. 
C) Inquire of management about its process for reclassifications. 
D) Review reports of internal audits.

Question 12

Testing debt securities and commercial paper would typically include an analysis of interest income.

Accepted Answer

A) True 
 B)False

Question 13

The recording of a marketable security depends,in large part,on management's intention with the investment.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not an internal control the auditor would expect to find in place for all cash processing systems?

Accepted Answer

A) Restrictive endorsement of checks. 
B) Independent reconciliation. 
C) Walkthrough. 
D) Prenumbered cash receipt documents. 
A) Restrictive endorsement of checks. 
B) Independent reconciliation. 
C) Walkthrough. 
D) Prenumbered cash receipt documents.

Question 15

Which of the following items would not normally appear on bank reconciliations?

Accepted Answer

A) Balance per bank. 
B) Outstanding deposits list. 
C) Balance per books. 
D) Outstanding checks list. 
A) Balance per bank. 
B) Outstanding deposits list. 
C) Balance per books. 
D) Outstanding checks list.

Question 16

Electronic authorization privileges for cash transactions may be best assigned to individuals based on which of the following?

Accepted Answer

A) Roles and activities falling within appropriate segregation of duties. 
B) Identification cards with picture identification. 
C) Encrypted passwords memorized by employees. 
D) The principle of "absolute knowledge." 
A) Roles and activities falling within appropriate segregation of duties. 
B) Identification cards with picture identification. 
C) Encrypted passwords memorized by employees. 
D) The principle of "absolute knowledge."

Question 17

Which of the following procedures does the auditor typically perform when testing the existence of cash?

Accepted Answer

A) Counting cash at the depository institution. 
B) Inquiry of management. 
C) Sending a standard bank confirmation. 
D) Tracing the bank reconciliation to the general ledger. 
A) Counting cash at the depository institution. 
B) Inquiry of management. 
C) Sending a standard bank confirmation. 
D) Tracing the bank reconciliation to the general ledger.

Question 18

Which one of the following risks is not a risk associated with cash?

Accepted Answer

A) Large volume of transactions. 
B) Importance of meeting debt covenants. 
C) Complex valuation issues. 
D) Easy to manipulate. 
A) Large volume of transactions. 
B) Importance of meeting debt covenants. 
C) Complex valuation issues. 
D) Easy to manipulate.

Question 19

As cash processing systems become more automated and integrated,which of the following is true about the general concept of segregation of duties?

Accepted Answer

A) Segregation of duties becomes less important. 
B) Segregation of duties becomes more important. 
C) The importance of segregation of duties does not change. 
D) Segregation of duties becomes completely computerized without human involvement. 
A) Segregation of duties becomes less important. 
B) Segregation of duties becomes more important. 
C) The importance of segregation of duties does not change. 
D) Segregation of duties becomes completely computerized without human involvement.

Question 20

Planning analytical procedures for cash balances typically include trend analysis and ratios for comparison with the auditor's expectations.

Accepted Answer

A) True 
 B)False

Under which of the following circumstances would the valuation assertion for cash most likely have an increased level of inherent risk?

Independent reconciliations of bank statement balances with the balance on the books should identify misstatements and any unusual banking activity.

The audit of the cash account is inherently risky due to volume of activity,liquidity,and the account's susceptibility to fraud.

The standard bank confirmation is used by the auditor to test for lapping.

How will the auditor most likely utilize the bank reconciliation as evidence in the audit of cash?

Cash and cash equivalents reported on the balance sheet may include debt securities that mature less than six months from the balance sheet date.

Which of the following is the most relevant assertion with regards to the audit of cash?

Which of the following represents a typical substantive audit procedure for cash balances?

The cutoff statement is mailed to the client for an agreed-upon date and then copied for the audit files.

Auditing marketable securities - assertions Identify at least eight sources of evidence and testing the auditor may use in the audit of marketable securities by major assertion tested.

Which of the following is not a common test of controls for marketable securities?

Testing debt securities and commercial paper would typically include an analysis of interest income.

The recording of a marketable security depends,in large part,on management's intention with the investment.

Which of the following is not an internal control the auditor would expect to find in place for all cash processing systems?

Which of the following items would not normally appear on bank reconciliations?

Electronic authorization privileges for cash transactions may be best assigned to individuals based on which of the following?

Which of the following procedures does the auditor typically perform when testing the existence of cash?

Which one of the following risks is not a risk associated with cash?

As cash processing systems become more automated and integrated,which of the following is true about the general concept of segregation of duties?

Planning analytical procedures for cash balances typically include trend analysis and ratios for comparison with the auditor's expectations.

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

Under which of the following circumstances would the valuation assertion for cash most likely have an increased level of inherent risk?

Independent reconciliations of bank statement balances with the balance on the books should identify misstatements and any unusual banking activity.

The audit of the cash account is inherently risky due to volume of activity,liquidity,and the account's susceptibility to fraud.

The standard bank confirmation is used by the auditor to test for lapping.

How will the auditor most likely utilize the bank reconciliation as evidence in the audit of cash?

Cash and cash equivalents reported on the balance sheet may include debt securities that mature less than six months from the balance sheet date.

Which of the following is the most relevant assertion with regards to the audit of cash?

Which of the following represents a typical substantive audit procedure for cash balances?

The cutoff statement is mailed to the client for an agreed-upon date and then copied for the audit files.

Auditing marketable securities - assertions Identify at least eight sources of evidence and testing the auditor may use in the audit of marketable securities by major assertion tested.

Which of the following is not a common test of controls for marketable securities?

Testing debt securities and commercial paper would typically include an analysis of interest income.

The recording of a marketable security depends,in large part,on management's intention with the investment.

Which of the following is not an internal control the auditor would expect to find in place for all cash processing systems?

Which of the following items would not normally appear on bank reconciliations?

Electronic authorization privileges for cash transactions may be best assigned to individuals based on which of the following?

Which of the following procedures does the auditor typically perform when testing the existence of cash?

Which one of the following risks is not a risk associated with cash?

As cash processing systems become more automated and integrated,which of the following is true about the general concept of segregation of duties?

Planning analytical procedures for cash balances typically include trend analysis and ratios for comparison with the auditor's expectations.

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