Question 1

Which of the following is not a normal edit test as part of computerized control for checks?

Accepted Answer

A)  Field checks.
B)  Self-checking digits.
C)  Cross-references.
D)  Reasonableness tests.E) B) and C)
F) A) and B)

Question 2

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.E) A) and C)
F) None of the above

Question 3

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.E) A) and D)
F) None of the above

Question 4

Which of the following would not be used as part of analytical procedure for marketable securities?

Accepted Answer

A)  Develop expectations about the level of amounts in ending balances.
B)  Develop expectations about the relationship between the balances.
C)  Verify ending balances prior to calculating the percent change.
D)  Review changes in the balances,risk composition,and classification types.E) A) and B)
F) A) and C)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is required by accounting standards for the presentation and disclosure of investments in marketable securities?

Accepted Answer

A)  By classification as trading,available-for-sale or held-to maturity.
B)  For an analyst's determination of liquidity.
C)  For the company's physical possession of the security versus agent holdings.
D)  For the expected success of the organization of investment.E) A) and B)
F) B) and C)

Question 7

What form of evidence is used by the auditor to verify bank reconciliation items?

Accepted Answer

A)  Cash counting observation.
B)  General ledger.
C)  Bank reconciliation.
D)  Cutoff statement.E) All of the above
F) B) and D)

Question 8

A compensating balance arrangement usually results in which of the following for a company?

Accepted Answer

A)  Increase its interest income.
B)  Increase the effective interest rate on corporate borrowing.
C)  Decrease the effective interest rate on corporate borrowing.
D)  Exhibit no change in the effective interest rate on corporate borrowing.E) None of the above
F) A) and B)

Question 9

When the year-end cash balance is immaterial,audit procedures on the cash account are unnecessary.

Accepted Answer

A) True 
 B)False

Question 10

A turnaround document is an effective control because it lists useful information for further processing of the collection on account.

Accepted Answer

A) True 
 B)False

Question 11

Electronic Funds Transfers have controls built into the process and do not require further reconciliation by the client.

Accepted Answer

A) True 
 B)False

Question 12

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.E) A) and B)
F) None of the above

Question 13

The auditor will send a standard bank confirmation to which of the following?

Accepted Answer

A)  Financial institutions of customers using the lockbox.
B)  Financial institutions for which the client has a balance greater than $0 at the end of the year.
C)  Financial institutions with which the client has transacted during the year.
D)  Financial institutions used by significant shareholders.E) All of the above
F) A) and B)

Question 14

The ending price of securities can be verified through reliable publications and websites such as the Wall Street Journal.

Accepted Answer

A) True 
 B)False

Question 15

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

Assertion ...

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Inadequate records of cash by the company can provide opportunity for fraud.

Accepted Answer

A) True 
 B)False

Question 18

Lockbox utilization Describe the cash management technique of a lockbox,including why it is used.

Accepted Answer

When using a lockbox system to accelerat...

Question 19

A company must do which of the following,if a company maintains a compensating balance of cash?

Accepted Answer

A)  Disclose the compensating account arrangement in financial statements.
B)  Close out the balance prior to year-end.
C)  Tie balances to debt covenants.
D)  Provide a lockbox for appropriate line-of-credit draws.E) A) and C)
F) C) and D)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 10: Auditing Cash and Marketable Securities

Which of the following is not a normal edit test as part of computerized control for checks?

Correct AnswerverifiedShow Answer

A compensating balance arrangement usually results in which of the following for a company?

Correct AnswerverifiedShow Answer

Lockbox utilization Describe the cash management technique of a lockbox,including why it is used.

Correct AnswerverifiedWhen using a lockbox system to accelerat...View AnswerShow Answer

What form of evidence is used by the auditor to verify bank reconciliation items?

Correct AnswerverifiedShow Answer

A turnaround document is an effective control because it lists useful information for further processing of the collection on account.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A company must do which of the following,if a company maintains a compensating balance of cash?

Correct AnswerverifiedShow Answer

The ending price of securities can be verified through reliable publications and websites such as the Wall Street Journal.

Correct AnswerverifiedShow Answer

Electronic Funds Transfers have controls built into the process and do not require further reconciliation by the client.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedAssertion ...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following would not be used as part of analytical procedure for marketable securities?

Correct AnswerverifiedShow Answer

Inadequate records of cash by the company can provide opportunity for fraud.

Correct AnswerverifiedShow Answer

Which of the following is required by accounting standards for the presentation and disclosure of investments in marketable securities?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The auditor will send a standard bank confirmation to which of the following?

Correct AnswerverifiedShow Answer

When the year-end cash balance is immaterial,audit procedures on the cash account are unnecessary.

Correct AnswerverifiedShow Answer

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When using a lockbox system to accelerat...
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Assertion ...
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