Chapter 10 Multiple Choice

By preparing a four-column bank reconciliation ("proof of cash") at year-end, an auditor will generally be able to detect: a. An unrecorded deposit made at the bank at the end of the month. b. A second payment of an account payable which had already been paid in full two months earlier. c. An embezzlement of cash receipts not recorded in the cash receipts journal before they had been deposited into the bank. d. A receivable collected that had previously been written off as uncollectible.

a. An unrecorded deposit made at the bank at the end of the month.

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: a. Details of bank deposit slips with details of credits to customer accounts. b. Daily cash summaries with the sums of the cash receipts journal entries. c. Individual bank deposit slips with the details of the monthly bank statements. d. Dates uncollectible accounts are authorized to be written off with the dates the writeoffs are actually recorded.

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

Reconciliation of the bank account should not be performed by an individual who also: a. Processes cash disbursements. b. Has custody of securities. c. Prepares the cash budget. d. Reviews inventory reports.

a. Processes cash disbursements.

The auditors who physically examine securities should insist that a client representative be present in order to: a. Detect fraudulent securities. b. Lend authority to the auditors' directives. c. Acknowledge the receipt of securities returned. d. Coordinate the return of securities to the proper locations.

c. Acknowledge the receipt of securities returned.