Audit Practice Exam - Cash Unit | Take the Quiz

When counting cash on hand the auditor must exercise control over all cash and other negotiable assets to prevent:

Theft

Irreggular endorsement

Substitution

Deposits in transit

Which of the following is not an audit objective related to cash?

Reported cash exists

The client has ownership rights in the reported cash

Compensating cash balances are reported as other current assets

The reported cash balance includes all cash transactions that should have been recorded

Normally, the audit objective of valuation is of minimum concern during the audit of cash. However, the auditor's concern abouut the valuation objective would most liekly increase when"

Both currency and negotiable securities areon hand

The proof of cash cannot be reconciled

The client uses a demand deposit account

The client has foreign currency accounts

The primary evidence regarding year-end bank balances is documented in the:

Standard bank confirmations

Bank reconciliations

Interbank transfer schedule

Bank deposit lead schedule

The standard bank cash confirmation form requests all of the following except:

Due date of a direct liability

The principal amount paid on a direct liability

Description of collateral for a direct liability

The interest rate of a direct liability

An auditor ordinarily sends a standard confirmation request to alll banks with which the client has done business during the year under audit, regardless of year-end balance. A purpose of this procedure is to:

Provide the data necessary to prepare a proof of cash

Request that a cutoff bank statement and related checks be sent to the auditor

Detect kiting activities that may otherwise not be discovered

Seek information about other deposit and loan amounts that com to the attention of the institution completing the confirm

A bank cutoff statement would be least likely to detect:

Inclusion of nonexistent deposit in transit on the bank reocnciliation

Omission of checks, which were written prior to year-end, from the outstanding check list on the bank reconciliation

Writing and dating of checks prior to year-end but not releasing the checks until after year-end

Application of cash receipts from one customer to another customer's account (lapping)

During the exmaination of a cutoff bank statement, an auditor noticed that the majority of checks listed as outstanding at the preceding 12/31 had not cleared the bank. Which of the following would not be a likely explanation of this finding.

Checks were written prior to year-end but were not mailed on a timely basis

Kiting was used to cover a shortage of cash

Cash disbursements journal had been held open past year-end

The cutoff bank statement was requested too soon after year-end

Which of the following is one of the better auditing techniques that might be used to detect kiting?

Reveiew composition of authenticated deposit slips

Reveiew subsequent bank statements and canceled checks received directly from the banks

Prepare a schedule of bank transfers from the client's books

Prepare year-end bank reocnciliations

What cash transfer would result in a misstatement of cash at year end?

All items recorded in following year except one

All items recorded in audited year except one

The auditor's count of the client's cash should be coordinated to coincide with

Study of the internal control structure with respect to cash

Close of business on the balance sheet date

Count of marketable securities

Count of inventories

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Audit Practice Exam - Cash Unit

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