Question 1

Outline the audit procedures that would be performed when testing electronic receipts and payments.

Accepted Answer

Procedures would include:
•agreeing elec...

Question 2

You are the auditor of Brody Grass Inc. The CEO expressed a concern that the audit fees for the year were very high. You explained that this is largely due to poor internal controls in the cash and transaction cycle and that the audit fees could decrease if better controls were in place.
Provide 5 examples of general cash account controls that Brody Grass Inc. could implement.

Accepted Answer

Note that the list below is not exhausti...

Question 3

What is the purpose of an extended test of the bank reconciliation?

Accepted Answer

A)   to verify whether all transactions included in the journals for the last month of the year were correctly allocated to the bank reconciliation
B)   to compensate for material weaknesses in internal control with respect to segregation of duties
C)   to increase detection risk for the audit of cash
D)   to verify whether specific transactions that flowed through the cash account were correctly recordedE) B) and D)
F) B) and C)

Question 4

In an effort to satisfy the completeness objective, the auditor could perform which of the following test of details of balance procedures?

Accepted Answer

A)   Trace the book balance on the reconciliation to the general ledger.
B)   Trace outstanding cheques to subsequent period bank statements.
C)   Obtain and test a cutoff bank statement.
D)   Review financial statements to make sure that material savings accounts and certificates of deposit are disclosed separately.E) None of the above
F) A) and B)

Question 5

Electronic data interchange (EDI)  represents the electronic transfer of

Accepted Answer

A)   funds.
B)   business documents.
C)   data between accounting systems of the company's entities.
D)   information between the bank and the company.E) A) and B)
F) B) and D)

Question 6

A partial-period bank statement and the related cancelled cheques, duplicate deposit slips, and other documents included in bank statements, mailed by the bank directly to the public accounting firm's office, is called a

Accepted Answer

A)   four-column proof of cash.
B)   bank statement.
C)   cutoff bank statement.
D)   short-period bank statement.E) All of the above
F) B) and C)

Question 7

Toasted Tomato is a restaurant in Ottawa. You walk by this restaurant frequently and noticed it is usually empty. When you came in to do the audit, you were surprised to see that they had a large cash balance and high sales. Toasted Tomato might

Accepted Answer

A)   have a going concern issue.
B)   be engaging in money laundering.
C)   have lower business risk than initially anticipated.
D)   have weak internal controls.E) C) and D)
F) None of the above B

Question 8

Certain types of misstatements that affect cash may be detected in the audit of tests of controls. Which of the following misstatements would be detected in the audit of the acquisition and payment cycle?

Accepted Answer

A)   failure to bill a customer for goods shipped
B)   billing a customer at the incorrect price
C)   improper reimbursement of an officers' personal expenses
D)   paying an employee at the incorrect wage rateE) A) and D)
F) B) and C)

Question 9

Petty cash tests can ordinarily be performed at any time during the year, but as a matter of convenience they are typically done

Accepted Answer

A)   on the balance sheet date.
B)   near the end of the field work.
C)   at the same time as the observation of inventory, since both auditor and client must be present at that time.
D)   on any interim date.E) None of the above
F) All of the above

Question 10

The test of balances procedure that requires the auditor to trace the unadjusted 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.E) B) and D)
F) B) and C) D

Question 11

Which of the following misstatements in the payroll cycle could be detected during the audit of payroll transactions (but would not be discovered as part of the audit of the bank reconciliation) ?

Accepted Answer

A)   failure to include outstanding payroll cheques on the outstanding cheque list
B)   overpayment of Receiver General payments received after the year end but recorded as cash receipts in the current year
C)   unclaimed payroll cheques recorded as a deposit near the end of the year, but reconciled as deposits in transit
D)   payment to fictitious employees that had been set up by the payroll supervisorE) A) and B)
F) All of the above

Question 12

Testing to ensure that bank transfers are recorded in both the receiving and disbursing banks helps to detect evidence

Accepted Answer

A)   that would reduce inherent risk to a minimum.
B)   associated with an attempt to conceal a theft of cash.
C)   that increases reliability with respect to the accuracy of the transfer schedule.
D)   that would warrant decreasing control risk to a minimum.E) C) and D)
F) All of the above

Question 13

A) Explain what is meant by kiting and discuss how it is performed.
B) Discuss how an auditor can test for kiting.

Accepted Answer

A)Kiting is transferring money from one ...

Question 14

Disbursements on the bank transfer schedule should be correctly included in or excluded from year-end bank reconciliations as outstanding cheques. Understating outstanding cheques on the bank reconciliation indicates

Accepted Answer

A)   the possibility of kiting.
B)   a cutoff error in the bank account.
C)   an understatement of the bank balance.
D)   an increase in inherent risks associated with cash.E) B) and C)
F) A) and D)

Question 15

Bank reconciliations are normally verified on a 100-percent basis. Testing the reasonableness of the cash balance is therefore

Accepted Answer

A)   less important than for most other audit areas.
B)   more important than for other audit areas.
C)   equally as important as other audit areas.
D)   less important than for the audit of other assets but more important than the audit of liabilities.E) B) and C)
F) None of the above

Question 16

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to

Accepted Answer

A)   verify the cash balance reported on the bank confirmation inquiry form.
B)   verify reconciling items on the client's bank reconciliation.
C)   detect lapping.
D)   detect kiting.E) A) and B)
F) C) and D)

Question 17

If the auditor does not obtain a cutoff statement directly from the bank for testing, an alternative procedure that the auditor can use is to

Accepted Answer

A)   account for a continuity of cheques that covers the year end.
B)   reconcile cash paid to the cash disbursements journal for the last month of the year.
C)   reconcile cash received to the cash receipts journal for the last month of the year.
D)   prove the bank statement for the period after the year end.E) A) and B)
F) None of the above

Question 18

During the audit of cash, the focus of the audit is to

Accepted Answer

A)   do substantive tests of payments for supplies.
B)   conduct control tests of sales transactions.
C)   verify the bank reconciliation.
D)   conduct control tests over payments.E) A) and D)
F) B) and D)

Question 19

Jane works for Middle Co. She is responsible for opening the mail and preparing the bank deposit for cheques received, which she then gives to the owner. After the owner has deposited the cash, he gives Jane the stamped bank deposit slip, which she uses to record the cash received in the accounts receivable records. How does this allocation of responsibilities affect the audit process?

Accepted Answer

A)   The auditor should increase control testing with respect to the accuracy assertion.
B)   The auditor should do substantive tests (compare the deposit slips to the accounts receivable records) .
C)   The auditor should consider the possibility of material fraud.
D)   The auditor should increase control testing with respect to the completeness assertion.E) C) and D)
F) A) and D)

Question 20

The auditor has determined exchange rates used by the client to present cash in foreign currencies and has recalculated the amounts. Which audit assertion is associated with this audit procedure?

Accepted Answer

A)   existence
B)   valuation
C)   allocation
D)   classificationE) C) and D)
F) B) and D) B

Exam 17: Audit of Cash Balances

Outline the audit procedures that would be performed when testing electronic receipts and payments.

Correct Answer
verified
Procedures would include:
•agreeing elec...
View Answer

Correct Answer
verified
Note that the list below is not exhausti...
View Answer

What is the purpose of an extended test of the bank reconciliation?

Correct Answer
verified

In an effort to satisfy the completeness objective, the auditor could perform which of the following test of details of balance procedures?

Correct Answer
verified

Electronic data interchange (EDI) represents the electronic transfer of

Correct Answer
verified

A partial-period bank statement and the related cancelled cheques, duplicate deposit slips, and other documents included in bank statements, mailed by the bank directly to the public accounting firm's office, is called a

Correct Answer
verified

Toasted Tomato is a restaurant in Ottawa. You walk by this restaurant frequently and noticed it is usually empty. When you came in to do the audit, you were surprised to see that they had a large cash balance and high sales. Toasted Tomato might

Correct Answer
verified
B

Certain types of misstatements that affect cash may be detected in the audit of tests of controls. Which of the following misstatements would be detected in the audit of the acquisition and payment cycle?

Correct Answer
verified

Petty cash tests can ordinarily be performed at any time during the year, but as a matter of convenience they are typically done

Correct Answer
verified

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

Correct Answer
verified
D

Which of the following misstatements in the payroll cycle could be detected during the audit of payroll transactions (but would not be discovered as part of the audit of the bank reconciliation) ?

Correct Answer
verified

Testing to ensure that bank transfers are recorded in both the receiving and disbursing banks helps to detect evidence

Correct Answer
verified

A) Explain what is meant by kiting and discuss how it is performed. B) Discuss how an auditor can test for kiting.

Correct Answer
verified
A)Kiting is transferring money from one ...
View Answer

Disbursements on the bank transfer schedule should be correctly included in or excluded from year-end bank reconciliations as outstanding cheques. Understating outstanding cheques on the bank reconciliation indicates

Correct Answer
verified

Bank reconciliations are normally verified on a 100-percent basis. Testing the reasonableness of the cash balance is therefore

Correct Answer
verified

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to

Correct Answer
verified

If the auditor does not obtain a cutoff statement directly from the bank for testing, an alternative procedure that the auditor can use is to

Correct Answer
verified

During the audit of cash, the focus of the audit is to

Correct Answer
verified

Correct Answer
verified

The auditor has determined exchange rates used by the client to present cash in foreign currencies and has recalculated the amounts. Which audit assertion is associated with this audit procedure?

Correct Answer
verified
B

Exam 17: Audit of Cash Balances

Outline the audit procedures that would be performed when testing electronic receipts and payments.

Correct AnswerverifiedProcedures would include:•agreeing elec...View AnswerShow Answer

Correct AnswerverifiedNote that the list below is not exhausti...View AnswerShow Answer

What is the purpose of an extended test of the bank reconciliation?

Correct AnswerverifiedShow Answer

In an effort to satisfy the completeness objective, the auditor could perform which of the following test of details of balance procedures?

Correct AnswerverifiedShow Answer

Electronic data interchange (EDI) represents the electronic transfer of

Correct AnswerverifiedShow Answer

A partial-period bank statement and the related cancelled cheques, duplicate deposit slips, and other documents included in bank statements, mailed by the bank directly to the public accounting firm's office, is called a

Correct AnswerverifiedShow Answer

Toasted Tomato is a restaurant in Ottawa. You walk by this restaurant frequently and noticed it is usually empty. When you came in to do the audit, you were surprised to see that they had a large cash balance and high sales. Toasted Tomato might

Correct AnswerverifiedB

Certain types of misstatements that affect cash may be detected in the audit of tests of controls. Which of the following misstatements would be detected in the audit of the acquisition and payment cycle?

Correct AnswerverifiedShow Answer

Petty cash tests can ordinarily be performed at any time during the year, but as a matter of convenience they are typically done

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

Which of the following misstatements in the payroll cycle could be detected during the audit of payroll transactions (but would not be discovered as part of the audit of the bank reconciliation) ?

Correct AnswerverifiedShow Answer

Testing to ensure that bank transfers are recorded in both the receiving and disbursing banks helps to detect evidence

Correct AnswerverifiedShow Answer

A) Explain what is meant by kiting and discuss how it is performed. B) Discuss how an auditor can test for kiting.

Correct AnswerverifiedA)Kiting is transferring money from one ...View AnswerShow Answer

Disbursements on the bank transfer schedule should be correctly included in or excluded from year-end bank reconciliations as outstanding cheques. Understating outstanding cheques on the bank reconciliation indicates

Correct AnswerverifiedShow Answer

Bank reconciliations are normally verified on a 100-percent basis. Testing the reasonableness of the cash balance is therefore

Correct AnswerverifiedShow Answer

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to

Correct AnswerverifiedShow Answer

If the auditor does not obtain a cutoff statement directly from the bank for testing, an alternative procedure that the auditor can use is to

Correct AnswerverifiedShow Answer

During the audit of cash, the focus of the audit is to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The auditor has determined exchange rates used by the client to present cash in foreign currencies and has recalculated the amounts. Which audit assertion is associated with this audit procedure?

Correct AnswerverifiedB

Correct Answer
verified
Procedures would include:
•agreeing elec...
View Answer

Correct Answer
verified
Note that the list below is not exhausti...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A)Kiting is transferring money from one ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B