Question 1

The auditor uses a proof of cash to determine whether:

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 2

A proof of cash receipts is not useful for uncovering the theft of cash receipts or the recording and deposit of an improper amount of cash.

Accepted Answer

A) True 
 B)False

Question 3

A proof of cash includes a reconciliation of cash receipts deposited in the bank with the cash disbursements records for a given period.

Accepted Answer

A) True 
 B)False

Question 4

A proof of cash includes four reconciliation tasks. List below at least TWO of those tasks.

Accepted Answer

1. Reconcile the balance on the bank sta

Question 5

The general cash account is considered a significant account in almost all audits:

Accepted Answer

A)  where the ending balance is material. 
B)  even when the ending balance is immaterial. 
C)  except those of not-for-profit organizations. 
D)  where either the beginning or ending balance is material. 
A)  where the ending balance is material. 
B)  even when the ending balance is immaterial. 
C)  except those of not-for-profit organizations. 
D)  where either the beginning or ending balance is material.

Question 6

A proof of cash involves a combination of substantive tests of transactions and tests of details of balances.

Accepted Answer

A) True 
 B)False

Question 7

The auditor must extend the audit procedures in the audit of year-end cash when there are inadequate internal controls.

Accepted Answer

A) True 
 B)False

Question 8

When auditing the year-end cash balance, one of the areas of focus is on the accuracy objective.

Accepted Answer

A) True 
 B)False

Question 9

Bank reconciliation audit tests are designed to detect misstatements other than through the improper payment of cash or failure to receive cash normally would not be detected as part of the tests of the bank reconciliation. List below at least THREE misstatements that are designed to be detected by bank reconciliation.

Accepted Answer

Failure to include a check that has not

Question 10

Discuss how an auditor can test for kiting.

Accepted Answer

To test for kiting, the auditor obtains

Question 11

Which of the following balance-related objectives applies to auditing the general cash account?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 12

Which of the following balance-related audit objectives typically is assessed as having high inherent risk for cash?

Accepted Answer

A)  Existenc 
B)  Cutoff 
C)  Detail tie-in 
D)  Presentation and disclosure 
A)  Existenc 
B)  Cutoff 
C)  Detail tie-in 
D)  Presentation and disclosure

Question 13

When the amount in the petty cash account is immaterial, most auditors would choose to test the account for reasons of client expectations.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following cycles does not affect cash in bank?

Accepted Answer

A)  Capital acquisitions cycle. 
B)  Inventory and warehousing. 
C)  Payroll and personnel cycle. 
D)  Acquisitions and disbursements. 
A)  Capital acquisitions cycle. 
B)  Inventory and warehousing. 
C)  Payroll and personnel cycle. 
D)  Acquisitions and disbursements.

Question 15

Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for:

Accepted Answer

A)  kiting. 
B)  lapping. 
C)  income smoothing. 
D)  channel stuffing. 
A)  kiting. 
B)  lapping. 
C)  income smoothing. 
D)  channel stuffing.

Question 16

Under which of the following circumstances would an auditor be most likely to intensify an examination of a $500 imprest petty cash fund?

Accepted Answer

A)  Reimbursement occurs twice each week. 
B)  The custodian endorses reimbursement checks. 
C)  Reimbursement vouchers are not prenumbered. 
D)  The custodian occasionally uses the cash fund to cash employee checks. 
A)  Reimbursement occurs twice each week. 
B)  The custodian endorses reimbursement checks. 
C)  Reimbursement vouchers are not prenumbered. 
D)  The custodian occasionally uses the cash fund to cash employee checks.

Question 17

Auditors will often prepare a Proof of Cash when the client has material internal control weaknesses in cash receipts and cash disbursements. The purpose of the proof of cash is to determine the client's accounting records for cash are reliable. List below the four requirements the proof of cash is designed to provide for the auditor.

Accepted Answer

All recorded cash receipts were deposite

Question 18

Explain what is meant by a cutoff bank statement, and discuss the purpose of the cutoff bank statement in the audit of cash.

Accepted Answer

A cutoff bank statement is a partial-per

Question 19

The standard bank confirmation form has been agreed upon by the:

Accepted Answer

A)  SEC and FASB. 
B)  AICPA and the SEC. 
C)  SEC and the American Bankers' Association. 
D)  AICPA and the American Bankers' Association. 
A)  SEC and FASB. 
B)  AICPA and the SEC. 
C)  SEC and the American Bankers' Association. 
D)  AICPA and the American Bankers' Association.

Question 20

Many auditors prove the subsequent period bank statement if a cutoff statement is not received directly from the bank. Discuss the purpose of proving the subsequent period statement, and explain the audit procedures performed during the proof.

Accepted Answer

The purpose of such a proof is to test w

Exam 23: Audit of Cash Balances

The auditor uses a proof of cash to determine whether:

A proof of cash receipts is not useful for uncovering the theft of cash receipts or the recording and deposit of an improper amount of cash.

A proof of cash includes a reconciliation of cash receipts deposited in the bank with the cash disbursements records for a given period.

A proof of cash includes four reconciliation tasks. List below at least TWO of those tasks.

The general cash account is considered a significant account in almost all audits:

A proof of cash involves a combination of substantive tests of transactions and tests of details of balances.

The auditor must extend the audit procedures in the audit of year-end cash when there are inadequate internal controls.

When auditing the year-end cash balance, one of the areas of focus is on the accuracy objective.

Discuss how an auditor can test for kiting.

Which of the following balance-related objectives applies to auditing the general cash account?

Which of the following balance-related audit objectives typically is assessed as having high inherent risk for cash?

When the amount in the petty cash account is immaterial, most auditors would choose to test the account for reasons of client expectations.

Which of the following cycles does not affect cash in bank?

Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for:

Under which of the following circumstances would an auditor be most likely to intensify an examination of a $500 imprest petty cash fund?

Explain what is meant by a cutoff bank statement, and discuss the purpose of the cutoff bank statement in the audit of cash.

The standard bank confirmation form has been agreed upon by the:

Many auditors prove the subsequent period bank statement if a cutoff statement is not received directly from the bank. Discuss the purpose of proving the subsequent period statement, and explain the audit procedures performed during the proof.

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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