Ch. 16 Homework & quiz

2. Existence, occurrence, accuracy, cutoff, and rights

-Count cash on hand -Confirm cash balances with financial institutions

Match each substantive procedure relative to cash listed with its corresponding audit objective or assertion: 1. Existence & accuracy

-Obtain analyses of cash balances and reconcile them to the general ledger

3. Cutoff, existence, occurrence, rights, and completeness

-Verify the client's cutoff of cash transactions -analyze bank transfers occurring at year-end

Tracing a sample of remittance advices to entries in the cash receipts journal tests which of the following assertions for cash?

Completeness

Level 1 inputs are more risky and difficult to audit than Level 3 inputs to a valuation model. T or F

False

4. Presentation and disclosure

Investigate payments to related parties

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

Which of the following audit procedures is the most appropriate when internal control over cash is weak or when an entity requests an investigation of cash transactions?

Proof of cash

As one of the year-end audit procedures, the auditor instructed the entity's personnel to prepare a standard bank confirmation request for a bank account that had been closed during the year. After the entity'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

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.

On receiving the cutoff bank statement, the auditor should vouch:

checks dated before year-end listed as outstanding on the year-end bank reconciliation to the cutoff statement

An auditor testing long-term investments would ordinarily use substantive analytical procedures to ascertain the reasonableness of the:

completeness of recorded investment income

An auditor would most likely verify the interest earned on bond investments by:

recomputing the interest earned on the basis of face amount, interest rate, and period held

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

seek information about loans from the banks

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

standard bank confirmations