CH6

A

An audit plan of substantive procedures for cash would not include A. request a cutoff bank statement be mailed to the client. B. request client to prepare bank reconciliations. C. prepare a schedule of interbank transfers for a period of ten business days before and after year-end date. D. obtain a written client representation concerning compensating balance agreements.

A

An entity with a large volume of customer remittances by mail could most likely reduce the risk of employee misappropriation of cash by using A . a bank lockbox system. B . independently prepared mailroom prelists. C daily check summaries. D . employee fidelity bonds.

D

As payments are received, one mailroom employee is assigned the responsibility of prelisting receipts and preparing the deposit slip prior to forwarding the receipts, deposit slip, and remittance advices to accounts receivable for posting. Accounts receivable personnel re-foot the deposit slip, stamp a restrictive endorsement on the back of each check, and then forward the receipts and deposit slip to the treasury department. Evaluate the internal control of the described process. Which of the following is a reasonable assessment of internal control in this process? A . Adequate internal control B . Inadequate internal control because mailroom employees should not have access to cash C . Inadequate internal control because treasury employees should prepare the deposit slip D . Inadequate internal control because of a lack of separation of duties

D

In order for auditors to be able to recognize potential fraud, they must be aware of the basic characteristics of fraud. Which of the following is not a characteristic of fraud? A Intentional deception B Taking unfair or dishonest advantage of other people C Perpetration for the benefit or detriment of the organization D Negligence on the part of executive management

D

In the audit of cash the auditor obtains a bank cutoff statement primarily to A. identify old outstanding checks that the client may exclude from the year-end bank reconciliation in order to misappropriate cash. B, obtain sufficient information to reconcile the client's bank account as of year-end. C, obtain direct confirmation of the client's bank balances as of year-end. D test the propriety of items appearing on the client's year-end bank reconciliation.

C

The mail which includes payments should be opened by two people. This control is called A . separation of duties. B . anti-collusion. C . joint custody. D . lapping.

B

To gather evidence regarding the bank's balance in a bank reconciliation, an auditor would examine all of the following except the A.cutoff bank statement. B. general ledger. C. bank confirmation. D. year-end bank statement.

B

Which of the following is not considered one of the three factors increasing the probability of fraud? A. Motive B. Lack of training C. Opportunity D. Rationalization

D

Which of the following statements is correct with respect to the elements of the "fraud triangle"? A . Motive is a cause that pressures people into action. B . Opportunity refers to a situation that allows someone with motive to carry out fraud. C . A lack of integrity describes a person who does not stick to the social or organizational ethical code. D . All of these statements are correct.

C

Your client is in the process of acquiring another company. You have been requested to verify that cash for the company being acquired is properly stated. The audit technique that will yield the most persuasive evidence is A examination of the company's escrow account. B interview with the company's treasurer and cash manager. C preparation and review of standard bank confirmation inquiries. D analytical computations comparing current cash in the bank with previous accounting periods.