ACCT 4510 Audit Exam 3 - Ch 10

Contact with banks for the purpose of opening company bank accounts should normally be the responsibility of the corporate

Treasurer

Control over the receipt of cash sales is best achieved when two or more employees participate in each transaction

True

Your client left the cash receipts journal open after year-end for an extra day and included January 1 cash receipts in the 12/31/XX totals. All of those cash receipts were due to cash sales. Assuming the client uses a periodic inventory system with a 12/31/XX count of the physical inventory, which of the following is most likely to be true relating to the year XX financial statements?

Net income is overstated

Which of the following controls would be most likely to reduce the risk of diversion of customer receipts by a company's employees?

A bank lockbox system

The auditors should insist that a representative of the client be present during the physical examination of securities in order to

Acknowledge the receipt of securities returned

By preparing a four-column bank reconciliation ("proof of cash") for the last month of the year, an auditor will generally be able to detect

An unrecorded check written at the beginning of the month which was cashed during the period covered by the reconciliation

Banks may process electronic "substitute checks" in place of customer written hard copy checks due to the

Check Clearing for the 21st Century Act

Which of the following procedures in the cash disbursements cycle should not be performed by the accounts payable department?

Canceling supporting documentation after payment

Kiting would least likely be detected by

Comparing customer remittance advices with recorded disbursements in the cash disbursements journal.

A practical and effective audit procedure for the detection of lapping is

Comparing recorded cash receipts in detail against items making up the bank deposit as shown on duplicate deposit slips validated by the bank

Garcia was engaged to audit the financial statements of Delta Corporation for the year ended September 30, 20X0. Having completed an examination of the investment securities, which of the following is the best method of verifying the accuracy of recorded dividend income?

Comparing recorded dividends with a standard financial reporting service's record of dividends

Which of the following is the best audit procedure for the detection of lapping?

Comparison of postings of cash receipts to accounts with the details of cash deposits

Which one of the following audit procedures would give the least assurance of the existence of investment in stocks and bonds account at the audit date?

Examination of paid checks issued in payment of securities purchased

Signed checks should be returned to the cash disbursements clerk for mailing

False

The auditors should always count small petty cash funds at year-end to make sure that balance is not overstated on the financial statements

False

To gather evidence regarding the balance per bank in a bank reconciliation, an auditor could examine all of the following except

General ledger (Need cutoff, year-end bank statement, and bank confirmation)

Which of the following could not be more efficiently performed with data analytics?

Identification of an unrecorded cash deposit

Which of the following is correct concerning "window dressing" for cash?

It may increase but not falsify cash position

Anderson embezzled $20,000 from her company's account in Bank X. At year-end, she hid the shortage by making a deposit on December 31 in Bank X, drawn on Bank Y. She has not recorded the transaction on the books. This is an example of

Kiting

Which of the following is not a control that generally is established over cash transactions?

Obtaining a receipt for every disbursement

In November, two months before year-end, the bookkeeper erroneously recorded the receipt of a one year bank loan with a debit to cash and a credit to interest revenue. The most effective method for detecting this type of error is

Send a bank confirmation as of year-end

Which one of the following would the auditor consider to be an incompatible operation if the cashier receives remittances from the mailroom?

The cashier posts the receipts to the accounts receivable subsidiary ledger

The Standard Form to Confirm Account Balances with Financial Institutions includes information on all of the following except

The principal amount paid on a direct liability

An auditor who is engaged to examine the financial statements of a business enterprise will request a cutoff bank statement primarily in order to

Verify reconciling items on the client's bank reconciliation

An auditor may obtain information on the December 31 month-end balance per bank in which of the following? Standard confirmation form and 1/1-1/10 cutoff statement: A. Yes Yes B. Yes No C. No Yes D. No No

Yes Yes