The cash account is affected by all of the entity's business processes Show
The general cash account is normally the principal account used to disburse payroll An imprest cash account is used for specific purposes and generally maintains a very small The auditor's use of analytical procedures for auditing cash is limited. A major control that directly affects the audit of cash is the bank reconciliation prepared by the auditor A cutoff bank statement is used to verify the propriety of the reconciling items shown on the bank reconciliation Kiting is an audit procedure used to test the accuracy of the cash receipts It is generally more efficient to follow a substantive strategy for auditing investments If the client maintains custody of its investments, the auditor normally examines the actual securities. Level 1 inputs are more risky and difficult to audit than Level 3 inputs to a valuation model. Which of the following internal controls most likely would reduce the risk of diversion of customer receipts by an entity's employees? The least crucial element of internal control over cash is Batch processing of checks Which of the following audit procedures is the most appropriate when internal control over cash is weak or when a client requests an investigation of cash transactions? An unrecorded check issued during the last week of the year would most likely be discovered by the auditor when the Cutoff bank statement is reconciled Which of the following is one of the better auditing techniques that might be used by an auditor to detect kiting between intercompany banks? Prepare a schedule of bank transfers. An interbank transfer schedule Helps the auditor test for kiting If fraud is suspected, auditors may complete all of the following procedures except Footing the bank reconciliation and the outstanding checks listing Of the following, which is the most efficient audit procedure for verification of interest earned on bond investments? Recomputing interest earned using the interest rate and bond amount. An auditor testings long term investments would ordinarily use substantive analytical procedures as he primary audit evidence to support the reasonableness of the Completeness of recorded investment income. To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor most likely would Examine the audited financial statements of the inverse company An auditor usually tests the reasonableness of dividend income from investments in stock of public companies by computing the amounts that should have been received by referring to Dividend record book produced by investment advisory services. Which of the following pairs of accounts would an auditor most likely analyze on the same working paper? Notes receivable and interest income In conforming with an outside agent, such as financial institution, that the agent is holding investment securities in the client's name, an auditor most likely gathers evidence in support of management's financial statement assertions regarding Existence, rights and obligations, and Completness All of the following can assist the auditor in testing the existence assertion for investment securities except Comparing fair value to cost An imprest cash account is One that contains a stipulated amount of money and is used for limited purposes. An auditor ordinarily should send a standard confirmation request to all banks with which the client has done business during the year under audit, regardless of the year end balance, because this procedure Seeks information about indebtedness to the bank. Tracing a sample of remittance advices to entries in the cash receipts journal tests which of the following assertions Examining a sample of cancelled checks for an authorized signature tests which of the following assertions for cash? The cashier of Brooke Company covered a shortage in the cash working fund with cash obtained on December 31 from a local bank by cashing, but not recording, a check drawn on the company's out of town bank. How would the auditor discover this manipulation Preparing and detail testing a bank transfer schedule The auditor should ordinarily mail confirmation requests to all banks with which the client has conducted any business during the year, regardless of the year end balance, since The confirmation form also seek information about indebtedness to the bank An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily to Verify reconciling items on the client's bank reconciliation An auditor should trace interbank transfers for the last part of the audit period and first part of the subsequent period to detect whether Cash balances were overstated because of kiting To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except for A primary purpose of the proof of cash is to Ensure that all cash receipts recorded in the cash receipts journal were deposited in the bank account A company has additional temporary funds to invest. The Board of Directors decided to purchase marketable securities and assigned the future purchase and sale decisions to a responsible financial executive. The best person(s) to make periodic reviews of the investment activity authorized by that executive should be An investment committee of the Board of Directors. A company holds bearer bonds as a short term investment. Responsibility for custody of these bonds and submission of coupons for collections of periodic interest probably should be delegated to the Which of the following controls would an entity most likely use in safeguarding against the loss of marketable securities? An independent trust company that has no direct contact with the employees who have record-keeping responsibilities has possession of the securities. Which of the following procedures most likely would give the greatest assurance that securities held as investments are safeguarded? Access to securities requires the presence of tow designated officials. Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom? The cashier posts the receipts to the accounts receivable subsidiary ledger cards. When an entity uses a trust company as custodian of its marketable securities, the possibility of concealing fraud most likely would be reduced if the Trust company has no direct contact with the entity employees responsible for maintaining investment account records. In a manufacturing company, which one of the following audit procedures would give the least assurance for the existence of the general ledger balance of investment in stocks and bonds at the audit date? Examination of canceled checks issued in payment of securities purchased. The auditor should insist that a representative of the client be present during the physical examination of securites in order to Acknowledge the receipt of securities returned. Which of the following is not one of the auditor's primary objectives in an examination of marketable securities? To determine whether securities are authentic Jones was engaged to examine the financial statements of Virginia Corporation for the year ended June 30. Having completed an examination of the investment securities, which of the following is the best method of verifying the accuracy of recorded dividend income? Comparing recorded dividends with a standard financial reporting service's record of dividends. A client has a large active investment portfolio that is kept in a bank safe deposit box. If the auditor is unable to examine and count the securities at the balance sheet date but will examine and count the securities shortly thereafter, the auditor most likely will Request that the client have the bank seal the safe deposit box until the auditor can count the securities as a subsequent date. In establishing the existence and ownership of a long term investment in stock of a publicly traded company, an auditor should inspect the securities of Confirm the number of shares owned that are held by an independent custodian Examining brokers' advices for a sample of securities purchased during the year is a test for the assertion of Under which of the following circumstances would an auditor be most likely to intensify an examination of a $1000 petty cash fund maintained on an imprest basis? Reimbursement of the fund from the general cash account occurs twice or more each week . As one of the year end audit procedures, the auditor instructed the client's personnel to prepare a standard bank confirmation request for a bank account that had been closed during the year. After the client's treasurer had signed the request, it was mailed to the bank by the assistant treasurer. What is the major flaw in this audit procedure? The request was mailed by the assistant treasurer The primary purpose of sending a standard confirmation request to financial institutions with which the client has done business during the year is to Corroborate information regarding deposit and loan balances. Which of the following control activities would an entity most likely use to assist in satisfying the completeness assertion related to long term investments? The internal auditor compares the securities in the bank safe deposit box with recorded investments. Which of the following controls would a company most likely use to safeguard marketable securities when an independent trust agent is not employed? Two company officials must be present to access marketable securities which are kept in a bank safe deposit box When there is large number of negotiable securities in multiple locations, careful planning of the physical inspection and count of the securities by the auditor is necessary to guard against Substitution of securities already counted at one location for other securities that should be on hand at a different location but are not. When an auditor is unable to inspect and count a client' s investment securities until after the balance sheet date, the bank where the securities are held in a safe deposit box should be notified on or before the balance sheet date that it will be asked to Confirm that there has been no access to the box between the balance sheet date and the security count date Which of the following would provide the best form of evidential matter pertaining to the annual valuation of a long term investment in which the independent auditor's client owns a 45 percent voting interest? Audited financial statements of the investee company. Which of the following procedures would be most important in the audit of an investment valued at fair value? Develop an independent estimate of the fair value measurement. Auditors will need to perform more substantive tests than normal to obtain sufficient appropriate evidence that a financial instrument is fairly stated if which of the following conditions exist? Management's key assumption are subject to volatility This account is the principal cash account of an entity This account is a separate cash account maintained at the local bank of the entity This account contains a stipulated amount of cash and is used for limited purposes This account is typically immaterial in amount and is used for paying certain types of expenses and transactions The initiation function is separate from the final approval
An individual can make fictitious transactions The valuation monitoring function is separate from the acquisition function An individual can improperly record securities values or not report the values to management Custody of the securities is separate from accounting for the securities. An individual can conceal a theft of securities The maintenance of the securities ledger is separate form that of the general ledger An individual can conceal any defalcation that would normally be detected by reconciliation of subsidiary records with general ledger control accounts. Which of the following controls would an entity most likely use to assist in satisfying the completeness assertion related to long term investment?Which of the following control activities would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments? The internal auditor compares the securities in the bank safe-deposit box with recorded investments.
Which of the following controls would an entity most likely use in safeguarding against the loss of trading securities?A trust organization which is independent and has no direct connection with the workforce or employees who have record-keeping responsibilities has possession of the securities are considered as the most likely control which should be used by the companies for safeguarding against the loss of trading securities.
Which of the following is a general IT control that would most likely assist an entity whose system analysts left the entity in the middle of a major project?C. Systems documentation. Systems documentation is a general control that would assist an entity whose systems analyst left in the middle of a major project. Such documentation would be prepared for each application system and would include narratives and flowcharts.
Which of the following internal controls would be most likely to reduce the risk of diversion of customer receipts by an entity's employees?Which of the following internal controls most likely would reduce the risk of diversion of customer receipts by an entity's employees? Explanation: A lockbox system is the best means of preventing fraud of cash by employees because they will never have direct access to cash receipts.
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Which of the following controls would an entity most likely use to assist in satisfying the valuation assertion related to long term investments?
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