ACC 550 - Ch. 10
Control over the receipt of cash sales is best achieved when two or more employees participate in each transaction.
T
Verification of cash and other liquid assets on the same date may prevent substitution of one form of asset for another.
T
The auditors' count of the client's cash should be coordinated to coincide with the: A) Count of investment securities. B) Count of inventories. C) Consideration of the internal controls with respect to cash. D) Close of business on the balance sheet date.
a
A proof of cash is an audit procedure that is performed on almost every engagement.
F
Confirmations for cash balances should be mailed only to the financial institutions with which the client has a cash balance at year-end.
F
Lapping of accounts receivable by an employee is not possible when there is adequate segregation of duties with respect to cash disbursements
F
An auditor may obtain information on the December 31 month-end balance per bank in which of the following? A). Standard Confirmation Report: Yes Jan. 1-10 cutoff statement: Yes B). Standard Confirmation Report: Yes Jan. 1-10 cutoff statement: No C). Standard Confirmation Report: No Jan. 1-10 cutoff statement: Yes D). Standard Confirmation Report: No Jan. 1-10 cutoff statement: No
a
As one of the year-end audit procedures, the auditor instructed the client's personnel to prepare a confirmation request for a bank account that had been closed during the year. After the client's treasurer has signed the request, it was mailed by the assistant treasurer. What is the major flaw in this audit procedure? A) The request was mailed by the assistant treasurer. B) The CPA did not sign the confirmation request before it was mailed. C) Sending the request was meaningless because the account was closed before the year-end. D) The confirmation request was signed by the treasurer.
a
Banks may process electronic "substitute checks" in place of customer written hard copy checks due to the: A) Check Clearing for the 21st Century Act. B) Foreign Corrupt Practices Act. C) Sarbanes-Oxley Act. D) Public Company Accounting Oversight Board's Standard No. 2.
a
Jones embezzled $10,000 from his company's account in Bank A. At year-end, he hid the shortage by making a deposit on December 31 in Bank A, drawn on Bank B. He has not recorded the transaction on the books. Which of the following is most likely to be effective in detecting this fraud? A) Bank confirmation. B) Comparison of bank cutoff statement to the cash receipts and disbursements records. C) Bank transfer schedule prepared using only the cash receipts and cash disbursements journals. D) Receivable confirmation
b
Properly designed internal control will permit the same employee to: A) Receive and deposit checks, and also approve write-offs of customer accounts. B) Sign checks, and also cancel supporting documents. C) Approve vouchers for payment, and also receive and deposit cash. D) Reconcile the bank statements, and also receive and deposit cash.
b
To gather evidence regarding the balance per bank in a bank reconciliation, an auditor could examine all of the following except: A) Year-end bank statement. B) General ledger. C) Bank confirmation. D) Cutoff bank statement.
b
A company's decision to use the fair value option for valuation of marketable securities is most likely to affect which of the following assertions the most? A) Fairness. B) Completeness. C) Presentation and Disclosure. D) Existence.
c
Which of the following controls would be most likely to reduce the risk of diversion of customer receipts by a company's employees? A) Approval of all disbursements by an individual independent of cash receipts. B) Prenumbered remittance advices. C) A bank lockbox system. D) Monthly bank cutoff statements.
c
For purposes of an audit of financial statements, electronic confirmation of cash balances: A) Is not acceptable. B) Is only acceptable for immaterial accounts. C) Is acceptable, but only when combined with a non-electronic approach. D) Is acceptable when properly controlled.
d