Chapter 10

The auditors who physically examine securities should insist that a client representative be present in order to:

Acknowledge the receipt of securities returned

Reconciliation of the bank account should not be performed by an individual who also

Processes cash disbursements

Which of the following controls would most likely reduce the risk of diversion of customer receipts by a clients employees?

A bank lockbox system

Hall company had large amounts of funds to invest on a temporary basis. The board of directors decided to purchase securities and derivatives and assigned the future purchase and sale decisions to a responsible financial executive. The best person or persons to make periodic reviews of the investment activity would be :

An investment committee of the board of directors

You have been assigned to the year-end audit of a financial institution and are planning the timing of audit procedures relating to cash. You decide that it would be preferable to:

Coordinate the count of cash with the count of marketable securities and other negotiable assets

The auditors suspect that a client's cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme, the auditors most likely would compare the :

Details of bank deposit slips with details of credits to customer accounts

To gather evidence regarding the balance per bank in a bank reconciliation the auditors would examine any of the following except :

General ledger

In testing controls over cash disbursements, the auditors most likely would determine that the person who signs checks also:

Is responsible for mailing the checks

Which of the following procedures would the auditors most likely perform to test controls relating to managements's assertion about the completeness of cash receipts for cash sales at a retail outlet

Observe the consistency of the employees use of cash registered and tapes

In order to guard against the misappropriation of company-owned marketable securities, which of the following is the best course of action that can be taken by a company with a large portfolio of marketable securities

Require that the safekeeping function for securities be assigned to a bank or stockbroker that will act as a custodial agent

The best way to verify the amounts of dividend revenue received during the year is

Verification by reference to dividend record books

To be provide assurance that each voucher is submitted and paid only once, the auditors most likely would examine a sample of paid vouchers and determine whether each voucher is

stamped "paid" by the check signer