Question 1

The most important balance-related audit objectives in the audit of cash include all but which of the following?

Accepted Answer

A)  Existence 
B)  Accuracy 
C)  Completeness 
D)  Occurrence 
A)  Existence 
B)  Accuracy 
C)  Completeness 
D)  Occurrence

Question 2

What should be audited on an interbank transfer schedule?

Accepted Answer

1. The accuracy of the information on th

Question 3

During his examination of a January 19, 2008 cutoff bank statement, an auditor noticed that the majority of checks listed as outstanding at December 31, 2007, had not cleared the bank. This would indicate:

Accepted Answer

A)  a high probability of kiting. 
B)  a high probability of lapping. 
C)  that the 2007 cash disbursements records had been closed prior to December 31, 2007. 
D)  that the 2007 cash disbursements records had been held open past December 31, 2007. 
A)  a high probability of kiting. 
B)  a high probability of lapping. 
C)  that the 2007 cash disbursements records had been closed prior to December 31, 2007. 
D)  that the 2007 cash disbursements records had been held open past December 31, 2007.

Question 4

A proof of cash disbursements is not effective for discovering checks written for an improper amount, fraudulent checks, or misstatements in which the dollar amount appearing in the cash disbursements records is incorrect.

Accepted Answer

A) True 
 B)False

Question 5

Auditors are not always required to obtain bank confirmations.

Accepted Answer

A) True 
 B)False

Question 6

The test details of balances procedure that requires the auditor to trace the book balance on the reconciliation to the general ledger is an attempt to satisfy the audit objective of:

Accepted Answer

A)  detail tie-in. 
B)  existence. 
C)  completeness. 
D)  accuracy. 
A)  detail tie-in. 
B)  existence. 
C)  completeness. 
D)  accuracy.

Question 7

Tracing outstanding checks to subsequent period bank statements tests the cutoff audit objective.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following verifications would generally not be performed by the auditor in the month subsequent to the balance sheet date?

Accepted Answer

A)  Foot the lists of all canceled checks, debit memos, deposits, and credit memos. 
B)  verify the bank statement balances when the footed totals are used. 
C)  Verify the book statement balances tie to the cash receipts and disbursements journals for the year under audit. 
D)  Review the items included in the footings to make sure that they were cancelled by the bank 
A)  Foot the lists of all canceled checks, debit memos, deposits, and credit memos. 
B)  verify the bank statement balances when the footed totals are used. 
C)  Verify the book statement balances tie to the cash receipts and disbursements journals for the year under audit. 
D)  Review the items included in the footings to make sure that they were cancelled by the bank

Question 9

If an unusually large portion of the checks listed as outstanding on the year-end bank reconciliation have not cleared the bank by the cutoff date, one possible cause could be that kiting is occurring.

Accepted Answer

A) True 
 B)False

Question 10

A major consideration in the audit of the general cash balance is the possibility of fraud. The auditor must extend his or her procedures in the audit of year-end cash to determine the possibility of a material fraud when there are:

Accepted Answer

A)  large cash balances at the end of the year. 
B)  large cash receipts and disbursements during the year. 
C)  no imprest accounts used for payroll. 
D)  inadequate internal controls. 
A)  large cash balances at the end of the year. 
B)  large cash receipts and disbursements during the year. 
C)  no imprest accounts used for payroll. 
D)  inadequate internal controls.

Question 11

The emphasis in verifying petty cash is normally on which of the following?

Accepted Answer

A)  Year-end balance 
B)  Controls over petty cash 
C)  Transactions for the period 
D)  Balance sheet classifications 
A)  Year-end balance 
B)  Controls over petty cash 
C)  Transactions for the period 
D)  Balance sheet classifications

Question 12

Explain kiting, and discuss how it is performed.

Accepted Answer

Kiting is the transfer of money from one

Question 13

The starting point for the verification of the balance in the general bank account is to obtain:

Accepted Answer

A)  a bank reconciliation from the client. 
B)  the client's cash account from the general ledger. 
C)  a cutoff bank statement directly from the bank. 
D)  the client's year-end bank statement and reconcile it. 
A)  a bank reconciliation from the client. 
B)  the client's cash account from the general ledger. 
C)  a cutoff bank statement directly from the bank. 
D)  the client's year-end bank statement and reconcile it.

Question 14

Based on the schedule of interbank transfers above, which of the cash transfers would appear as a deposit in transit on the December 31, 2007 bank reconciliation?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 15

Which of the following cash transfers results in a misstatement of cash on December 31, 2007?

Accepted Answer

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

Question 16

The most important control for petty cash is that two individuals maintain joint custody of the asset.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is correct?

Accepted Answer

A)  Bank personnel are responsible for providing reasonable assurance that a response to a bank confirmation is accurate. 
B)  Bank personnel are responsible for providing complete assurance that a bank confirmation is complete. 
C)  Bank personnel are not responsible for searching their records for bank balances or loans beyond those included on the bank confirmation. 
D)  Bank personnel are not responsible for providing information related to interest on the bank confirmation. 
A)  Bank personnel are responsible for providing reasonable assurance that a response to a bank confirmation is accurate. 
B)  Bank personnel are responsible for providing complete assurance that a bank confirmation is complete. 
C)  Bank personnel are not responsible for searching their records for bank balances or loans beyond those included on the bank confirmation. 
D)  Bank personnel are not responsible for providing information related to interest on the bank confirmation.

Question 18

Auditors are likely to prepare a proof of cash when the client has:

Accepted Answer

A)  material control weaknesses in cash receipts and cash disbursements. 
B)  material control weaknesses in accounts receivable and revenue. 
C)  material control weaknesses in accounts payable and inventory. 
D)  material control weaknesses in payroll. 
A)  material control weaknesses in cash receipts and cash disbursements. 
B)  material control weaknesses in accounts receivable and revenue. 
C)  material control weaknesses in accounts payable and inventory. 
D)  material control weaknesses in payroll.

Question 19

Because cash is the most desirable asset for people to steal, it has a higher:

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 20

Which of the following statements is correct?

Accepted Answer

A)  Auditors must obtain bank confirmations on every audit. 
B)  Auditors obtain bank confirmations at their discretion. 
C)  Auditing standards do not address specific requirements regarding bank confirmations. 
D)  Auditing standards do not require bank confirmations except when there is an unusually large number of inactive bank accounts. 
A)  Auditors must obtain bank confirmations on every audit. 
B)  Auditors obtain bank confirmations at their discretion. 
C)  Auditing standards do not address specific requirements regarding bank confirmations. 
D)  Auditing standards do not require bank confirmations except when there is an unusually large number of inactive bank accounts.

Exam 23: Audit of Cash Balances

The most important balance-related audit objectives in the audit of cash include all but which of the following?

What should be audited on an interbank transfer schedule?

During his examination of a January 19, 2008 cutoff bank statement, an auditor noticed that the majority of checks listed as outstanding at December 31, 2007, had not cleared the bank. This would indicate:

A proof of cash disbursements is not effective for discovering checks written for an improper amount, fraudulent checks, or misstatements in which the dollar amount appearing in the cash disbursements records is incorrect.

Auditors are not always required to obtain bank confirmations.

The test details of balances procedure that requires the auditor to trace the book balance on the reconciliation to the general ledger is an attempt to satisfy the audit objective of:

Tracing outstanding checks to subsequent period bank statements tests the cutoff audit objective.

Which of the following verifications would generally not be performed by the auditor in the month subsequent to the balance sheet date?

If an unusually large portion of the checks listed as outstanding on the year-end bank reconciliation have not cleared the bank by the cutoff date, one possible cause could be that kiting is occurring.

A major consideration in the audit of the general cash balance is the possibility of fraud. The auditor must extend his or her procedures in the audit of year-end cash to determine the possibility of a material fraud when there are:

The emphasis in verifying petty cash is normally on which of the following?

Explain kiting, and discuss how it is performed.

The starting point for the verification of the balance in the general bank account is to obtain:

Based on the schedule of interbank transfers above, which of the cash transfers would appear as a deposit in transit on the December 31, 2007 bank reconciliation?

Which of the following cash transfers results in a misstatement of cash on December 31, 2007?

The most important control for petty cash is that two individuals maintain joint custody of the asset.

Which of the following statements is correct?

Auditors are likely to prepare a proof of cash when the client has:

Because cash is the most desirable asset for people to steal, it has a higher:

Which of the following statements is correct?

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

Filters