ACCT 5100 CHAPTER 30-MCQ (ANSWER 100%) - 88545

Solution Posted by
anjis_devis

anjis_devis

Rating : (20)B
Solution Detail
Price: $20.00
  • From: Business, Accounting
  • Posted on: Sun 22 Feb, 2015
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description
If a bank does not respond to a bank confirmation request, an auditor may: Perform alternative procedures Send a second request Ask the client to communicate with the bank to ask them to complete and return the confirmation a. No Yes Yes b. No No Yes c. Yes No Yes d. Yes Yes No The most important controls for petty cash relate to: The use of a separate bank account The use of an imprest fund a. Yes Yes b. No No c. Yes No d. No Yes Which of the following cash transfers results in a misstatement of cash at December 31, 2007? Bank Transfer Schedule Recorded Disbursement Recorded Date transfer paid by transfer received in books by bank in books by bank a. 12/31/07 1/04/08 12/31/07 12/31/07 b. 1/04/08 1/05/08 12/31/07 1/04/08 c. 12/31/07 1/05/08 12/31/07 1/04/08 d. 1/04/08 1/11/08 1/04/08 1/04/08 _____ is cash stolen from an organization before it is recorded in the accounting records. a. Theft b. Cash larceny c. Skimming d. Floating The most important balance-related audit objectives in the audit of cash include all but which of the following? a. Existence b. Accuracy c. Completeness d. Occurrence 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. 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. The following information applies to the questions below: Listed below are four interbank cash transfers, indicated by the numbers 1, 2, 3, and 4, of a client for late December 2007 and early January 2008: Bank Account One Bank Account Two Disbursing Date Receiving Date (Month/Day) (Month/Day) Per Bank Per Books Per Bank Per Books 1. 12/31 12/30 12/31 12/30 2. 1/2 12/30 12/31 12/31 3. 1/3 12/31 1/2 1/2 4. 1/3 12/31 1/2 12/31 Based on the schedule of interbank transfers above, which of the cash transfers indicates an error in cash cutoff at December 31, 2007? a. 1 b. 2 c. 3 d. 4 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? a. 1 b. 2 c. 3 d. 4 Based on the schedule of interbank transfers above, which of the cash transfers would not appear as an outstanding check on the December 31, 2007 bank reconciliation? a. 1 b. 2 c. 3 d. 4 Which of the following errors would be least likely to be discovered during the tests of the bank reconciliation? a. Payment was made to an employee for more hours than he worked. b. Cash received by the client subsequent to the balance sheet date was recorded as cash receipts in the current year. c. Payments on notes payable were debited directly to the bank balance by the bank were not entered in the client’s records. d. Deposits were recorded in the cash receipts records near the end of the year, deposited in the bank, and were included in the bank reconciliation as a deposit in transit. When a customer fails to include a remittance advice with a payment, it is common practice for the person opening the mail to prepare one. Consequently, mail should be opened by which of the following four company employees? a. Receptionist. b. Sales manager. c. Credit manager. d. Accounts receivable clerk. Which of the following balance-related objectives applies to auditing the general cash account? Rights Classification Realizable value a. Yes No Yes b. No Yes No c. Yes Yes Yes d. No No No A proof of cash is not an effective procedure for identifying which of the following types of misstatements? a. All recorded disbursements were paid by the bank. b. All recorded cash receipts were deposited. c. All amounts that were paid by the bank were recorded. d. Some checks were written for incorrect amounts. The standard bank confirmation form has been agreed upon by the: a. SEC and FASB. b. AICPA and the SEC. c. SEC and the American Bankers’ Association. d. AICPA and the American Bankers’ Association. Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for: a. kiting. b. lapping. c. income smoothing. d. channel stuffing. Under which of the following circumstances would an auditor be most likely to intensify an examination of a $500 imprest petty cash fund? a. Reimbursement occurs twice each week. b. The custodian endorses reimbursement checks. c. Reimbursement vouchers are not prenumbered. d. The custodian occasionally uses the cash fund to cash employee checks. Contact with banks for the purpose of opening company bank accounts should normally be the responsibility of the corporate: a. board of directors. b. treasurer. c. controller. d. executive committee. On the last day of the fiscal year, the cash disbursements clerk drew a company check on bank A and deposited the check in the company account in bank B to cover a previous theft of cash. The disbursement has not been recorded. The auditor will best detect this form of kiting by: a. examining the composition of deposits in both bank A and bank B subsequent to year-end. b. examining paid checks returned with the bank statement of the next account period after year-end. c. preparing, from the cash disbursements records, a summary of bank transfers for one week prior to and subsequent to year-end. d. comparing the detail of cash receipts as shown by the client’s cash receipts records with the detail on the confirmed duplicate deposit tickets for three days prior to and subsequent to year-end. If an auditor “proves” the bank statement in the month subsequent to the balance sheet date, it is primarily a test for: a. errors. b. omissions. c. kiting. d. intentional misstatements. Which of the following misstatements is most likely to be uncovered during an audit of a client’s bank reconciliation? a. Duplicate payment of a vendor’s invoice. b. Billing a customer at a lower price than indicated by company policy. c. Failure to record a collection of a note receivable by the bank on the client’s behalf. d. Payment to an employee for more than the hours actually worked. Which of the following is the focus of an audit of cash for most companies? a. General cash account. b. Payroll cash account. c. Petty cash account. d. Money market account. The test of details of balances procedure that requires the auditor to foot the outstanding check list and deposits in transit is an attempt to satisfy which audit objective? a. Cutoff. b. Presentation and disclosure. c. Detail tie-in. d. Completeness. Which of the following cycles does not affect cash in bank? a. Capital acquisitions cycle. b. Inventory and warehousing. c. Payroll and personnel cycle. d. Acquisitions and disbursements. The audit objective of determining that cash in bank, as stated on the reconciliation, foots correctly and agrees with the general ledger can be tested by which of the following procedures? a. Performing tests for kiting. b. Receiving and testing a cutoff bank statement. c. Footing the outstanding checks list and the list of deposits in transit. d. Examining the minutes of the board of directors for restrictions on the use of cash. 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: a. detail tie-in. b. existence. c. completeness. d. accuracy. Which of the following statements is correct? 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. Cash is important to auditors primarily because of the potential for: a. errors. b. fraud. c. liquidity. d. expenditures. A partial-period bank statement and the related canceled checks, duplicate deposit slips, and other documents included in bank statements, mailed by the bank directly to the CPA firm’s office, is called: a. a four-column proof of cash. b. a year-end bank statement. c. a cutoff bank statement. d. a short-period bank statement. When the auditor believes the year-end bank reconciliation may be intentionally misstated, it is appropriate to perform extended tests of the year-end bank reconciliation. Assuming the client has a October 31 year-end, these extended tests would not include: a. comparing all September 30 reconciling items with canceled checks and other documents in the October bank statement. b. comparing all canceled checks and deposit slips in the October bank statement with the October cash disbursements and receipts records. c. carrying out all proper procedures subsequent to the end of the year with the use of the bank cutoff statement. d. determining that all outstanding checks had cleared by the date of the bank cutoff statement. Which of the following statements is correct? 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. The auditor uses a proof of cash to determine whether: All recorded cash disbursements were paid by the bank. All amounts that were paid by the bank were recorded. a. Yes Yes b. No No c. Yes No d. No Yes Which of the following would normally not be discovered as part of the audit of the bank reconciliation? a. Failure to bill a customer. b. Failure to include a deposit in transit on the bank reconciliation. c. Duplicate payment of a vendor’s invoice. d. Payment to an employee for more hours than she worked. A proof of cash represents: a. a test of controls and substantive test of transactions. b. a substantive test of transactions. c. a substantive test of transactions and test of details of balances. d. a test of details of balances. To gather evidence regarding the balance per bank in a bank reconciliation, an auditor would examine all of the following except the: a. general ledger. b. bank confirmation. c. cutoff bank statement. d. year-end bank statement. Which of the following balance-related audit objectives typically is assessed as having high inherent risk for cash? a. Existence. b. Cutoff. c. Detail tie-in. d. Presentation and disclosure. Which of the following is not a “cash equivalent”? a. Time deposits. b. Certificates of deposit. c. Money market funds. d. Marketable securities. The general cash account is considered significant in almost all audits: a. where the ending balance is material. b. even when the ending balance is immaterial. c. except those of not-for-profit organizations. d. where either the beginning or ending balance is material. Which of the following errors would be least likely to be discovered during the audit of the acquisitions and payments cycle? a. Duplicate payment of a vendor’s invoice. b. Improper payments of officers’ personal expenditures. c. Payment of interest to a related party for an amount in excess of the going rate. d. Payment for raw materials that were not received. Because cash is the most desirable asset for people to steal, it has a higher: a. control risk. b. inherent risk. c. detection risk. d. liquidity risk. Testing the reasonableness of the cash balance at year-end is less important when the year-end bank reconciliation is verified: a. on a 100% basis. b. by someone in client’s organization who is independent of the treasurer’s function. c. by someone in client’s organization who is independent of the controller’s function. d. by the owner/manager. 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: 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. The starting point for the verification of the balance in the general bank account is to obtain: 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. An imprest petty cash fund would least likely be used to pay for which of the following items? a. Minor office supplies b. Monthly interest expense c. Stamps for small mailings d. Small contributions to a local charity In an effort to satisfy the completeness objective, the auditor could perform which of the following test of details of balance procedures? a. Trace the book balance on the reconciliation to the general ledger. b. Trace outstanding checks to subsequent period bank statements. c. Perform a four-column proof of cash. d. Review financial statements to make sure that material savings accounts and certificates of deposit are disclosed separately. The audit procedure which requires the auditor to record the last check number used on the last day of the year and subsequently trace to the outstanding checks and the cash disbursements records is performed to satisfy the audit objective of: a. detail tie-in. b. existence. c. completeness. d. cutoff. The direct receipt of a confirmation from every bank with which the client does business is: a. required by auditing standards for every audit. b. not necessary unless material fraud is suspected. c. typically done but not required by auditing standards. d. necessary for every audit except when there are an unusually large number of active accounts. The reason for testing the client’s bank reconciliation is to verify whether the client’s recorded bank balance is the same amount as the actual cash in bank, except for deposits in transit, checks outstanding, and other reconciling items. The information needed to complete the tests of the reconciliation are provided by the: a. client’s records and ledgers for the year under audit. b. cutoff bank statement. c. client’s records and ledgers for the subsequent year. d. canceled checks for the year under audit. Which of the following items would not normally appear on bank reconciliations? a. Balance per bank b. List of deposits in transit c. Outstanding deposits d. Outstanding checks The concern in a monthly proof of cash is with: a. adjusting account balances. b. reconciling the amounts per books and bank. c. determining the month-end balance. d. identifying cash transfers. A proof of cash is effective at identifying which of the following misstatements? a. Checks written for incorrect amounts. b. Checks issued to invalid vendors. c. Fraudulent checks. d. Checks recorded by the books for an amount different than the check. The emphasis in verifying petty cash is normally on which of the following? a. Year-end balance b. Controls over petty cash c. Transactions for the period d. Balance sheet classifications The process of transferring money from one bank account to another and improperly recording the transaction is referred to as: a. kiting. b. lapping. c. scamming. d. embezzling.
Solution Description

If a bank does not respond to a bank confirmation request, an auditor may:

 

 

 

Perform alternative procedures

 

 

 

Send a second request

 

Ask the client to communicate with the bank to ask them to complete and return the confirmation

a.

No

 

Yes

 

Yes

b.

No

 

No

 

Yes

c.

Yes

 

No

 

Yes

d.

Yes

 

Yes

 

No

 

The most important controls for petty cash relate to:

 

The use of a separate bank account

 

The use of an imprest fund

 

a.

Yes

 

Yes

b.

No

 

No

c.

Yes

 

No

d.

No

 

Yes

 

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

       Bank Transfer Schedule

            Recorded           Disbursement                  Recorded           Date

            transfer  paid by              transfer              received

            in books by bank             in books             by bank

a.          12/31/07            1/04/08             12/31/07                        12/31/07

b.          1/04/08 1/05/08             12/31/07                        1/04/08

c.          12/31/07            1/05/08             12/31/07                        1/04/08

d.          1/04/08 1/11/08             1/04/08             1/04/08

_____ is cash stolen from an organization before it is recorded in the accounting records.

a.          Theft

b.          Cash larceny

c.          Skimming

d.          Floating

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

a.     Existence

b.     Accuracy

c.     Completeness

d.     Occurrence

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.          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.

The following information applies to the questions below:

Attachments
ACCT_5100_CHAPTER_30-MCQ_If_a_bank_does_not_respond_to_a_bank_confirmation_request,_an_auditor_may.d
ACCT_5100_CHAPT...