Audit FINAL

Fraud that involves theft of an entity’s asset

•  Fraudulent financial reporting

• A "cookie jar" reserve

• Misappropriation of assets

• Income smoothing

Misappropriation of assets

An auditor discovers that the company's bookkeeper unintentionally made an mistake in calculating the amount of the quarterly sales. This is an example of

 

employee fraud.

 

an error.

 

misappropriation of assets.

 

a defalcation.

 

An error

Auditing standards make ________ distinction(s. between the auditor's responsibilities for searching for errors and fraud.

 

some

 

a significant

 

no

 

various

no

If there is collusion among management, the chance a normal audit would uncover such fraud is

 

pretty low.

 

very high.

 

zero.

 

none of the above.

pretty low

Which of the following is a category of fraud?

• Fraudulent financial reporting

• Misappropriation of assets

YES, YES

Most cases of fraudulent reporting involve

 

inadequate disclosures.

 

an overstatement of income.

 

an overstatement of liabilities.

 

an overstatement of expenses.

an overstatement of income

Which of the following is not a factor that relates to opportunities to commit fraudulent financial reporting?

 

lack of controls related to the calculation and approval of accounting estimates

 

ineffective oversight of financial reporting by the board of directors

 

management's set of ethical values

 

high turnover of accounting, internal audit, and information technology staff

Management’s set of ethical values

Which of the following is a factor that relates to incentives or pressures to commit fraudulent financial reporting?

 

significant accounting estimates involving subjective judgments

 

excessive pressure for management to meet debt repayment requirements

 

management's habit of making overly aggressive forecasts

 

high turnover of accounting, internal audit, and information technology staff

Excessive pressure for management to meet debt repayment requirements

Which of the following is a factor that relates to attitudes or rationalization to misappropriate assets?

 

significant accounting estimates involving subjective judgments

 

excessive pressure for management to meet debt repayment requirements

 

a sense of superiority by executives

 

high turnover of accounting, internal audit and information technology staff

Sense of superiority of executives

When assessing fraud risk,

 

fraud risk is assessed only at the overall financial statement level.

 

the auditor's assessment of fraud risk should be ongoing throughout the audit.

 

if the auditor concludes that there is a risk of material misstatement due to fraud, auditing standards require that the risks be treated as pervasive.

 

auditing standards require that the auditor presume there is a risk of fraud in the inventory account.

the auditor's assessment of fraud risk should be ongoing throughout the audit.

Auditors may identify conditions during fieldwork that change or support a judgment about the initial assessment of fraud risks. Which of the following is not a condition which should alert an auditor that the initial assessment should be changed?

 

The subsidiary ledger agrees with the general ledger.

 

discrepancies in the accounting records

 

unusual relationships between the auditor and management

 

missing or conflicting evidence

Subsidiary ledger agrees with the general ledger

When the auditor identifies risk at the assertion level,

 

the auditor may need to obtain audit evidence that is more reliable and relevant.

 

the auditor may choose to conduct substantive testing during interim periods rather than at the end of the period.

 

the auditor may decrease the sample size.

 

both a and b

The auditor may need to obtain audit evidence that is more reliable and relevant

Auditing standards specifically require auditors to identify ________ as a potential fraud risk in most audits.

 

overstated assets

 

understated liabilities

 

revenue recognition

 

overstated expenses

Revenue recognition

To address heightened risks of fraud, the auditor can do all of the following except

 

use specialists to assist in evaluating the accuracy and reasonableness of management's key estimates.

 

decrease the amount of substantive tests.

 

use ACL or IDEA to search for fictitious revenue transactions.

 

use EXCEL to perform analytical procedures at the disaggregated level.

Decrease the amount of substantive tests

When the auditor suspects that fraud may be present, auditing standards require the auditor to

 

terminate the engagement with sufficient notice given to the client.

 

issue an adverse opinion or a disclaimer of opinion.

 

obtain additional evidence to determine whether material fraud has occurred.

 

re-issue the engagement letter.

Obtain additional evidence to determine whether material fraud has occured

Which of the following is not one of the three primary objectives of effective internal control?

 

reliability of financial reporting

 

efficiency and effectiveness of operations

 

compliance with laws and regulations

 

assurance of elimination of business risk

Assurance of elimination of business risk

Internal controls

 

are implemented by and are the responsibility of the auditors.

 

consist of policies and procedures designed to provide reasonable assurance that the company achieves its objectives and goals.

 

guarantee that the company complies with all laws and regulations.

 

only apply to SEC companies.

consist of policies and procedures designed to provide reasonable assurance that the company achieves its objectives and goals.

Sarbanes-Oxley requires management to issue an internal control report that includes two specific items. Which of the following is one of these two requirements?

 

a statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

 

a statement that management and the board of directors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

 

a statement that management, the board of directors, and the external auditors are jointly responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

 

a statement that the external auditors are solely responsible for establishing and maintaining an adequate system of internal control

A statement that management is responsible for establishing and maintaining an adequate internal control structure and procedures for financial reporting

The internal control framework used by most U.S. companies is the ________ framework.

 

FASB

 

PCAOB

 

COSO

 

SEC

COSO

The Sarbanes-Oxley Act requires

 

all public companies to issue reports on internal controls effectiveness.

 

all public companies to define adequate internal controls.

 

the auditor of public companies to design effective internal controls.

 

the auditor of public companies to withdraw from an engagement if internal controls are

all public companies to issue reports on internal controls effectiveness.

Which of the following activities would be least likely to strengthen a company's internal control?

 

separating accounting from other financial operations

 

maintaining insurance for fire and theft

 

evaluating responsibility for the performance of employee duties

 

carefully selecting and training employees

Maintaining insurance for fire and theft

Which of the following statements is most correct with respect to separation of duties?

 

A person who has temporary or permanent custody of an asset should account for that asset.

 

Employees who authorize transactions should not have custody of related assets.

 

Employees who open cash receipts should record the amounts in the subsidiary ledgers.

 

Employees who authorize transactions should have recording responsibility for these

Employees who authorize transactions should not have custody of related assets

Authorizations can be either general or specific. Which of the following is not
an example of a general authorization?

 

automatic reorder points for raw materials inventory

 

a sales manager's authorization for a sales return for a particular customer

 

preset credit limits for various classes of customers

 

a sales price list for merchandise

Sales manager’s authorization for a sales return for a particular customer

Which of the following best describes the purpose of control activities?

 

the actions, policies and procedures that reflect the overall attitudes of management

 

the identification and analysis of risks relevant to the preparation of financial statements

 

the policies and procedures that help ensure that necessary actions are taken to address risks to the achievement of the entity's objectives

 

activities that deal with the ongoing assessment of the quality of internal control by

the policies and procedures that help ensure that necessary actions are taken to address risks to the achievement of the entity's objectives

Which of the following best describes an entity's accounting information and communication system?

• Monitoring transactions

• Record and process transactions

• Initiate transactions

NO, YES, YES

Which of the following is not one of the subcomponents of the control environment?

 

management's philosophy and operating style

 

organizational structure

 

adequate separation of duties

 

commitment to competence

Adequate separation of duties

Which of the following statements related to application controls is correct?

 

Application controls relate to various aspects of the IT function including software acquisition and the processing of transactions.

 

Application controls relate to various aspects of the IT function including physical security and the processing of transactions in various cycles.

 

Application controls relate to all aspects of the IT function.

 

Application controls relate to the processing of individual transactions.

Application controls relate to the processing of individual transactions

For financial statement audits, auditors need to understand controls that are relevant to the audit in order to

A)identify and assess the risks of material misstatements.

B)perform preliminary analytical procedures.

C)detect fraud.

D)assess inherent risk.

identify and assess the risks of material misstatements.

Narratives, flowcharts, and internal control questionnaires are three common methods of

 

testing the internal controls.

 

documenting the auditor's understanding of internal controls.

 

designing the audit manual and procedures.

 

documenting the auditor's understanding of a client's organizational structure.

documenting the auditors understanding of internal controls

Which type of audit procedure is not used by the auditor to obtain an understanding of the design and implementation of internal control?

 

inquiry

 

observation

 

confirmation

 

inspection

Confirmation

Once auditors determine that entity level controls are designed and placed in the operation, they

A)make a preliminary assessment of controls for each transaction-related audit objective for each major type of transaction.

B)make a preliminary assessment of control risk.

C)obtain an understanding of the design and implementation of internal control.

D)prepare audit documentation in order to express their opinion on the company's internal control system

make a preliminary assessment of controls for each transaction-related audit objective for each major type of transaction.

To determine if significant internal control deficiencies are material weaknesses, they must be evaluated on their

• Likelihood

• Significance

YES, YES

A ________ exists if one or more control deficiencies exist that are less severe than a material weakness, but are important enough to merit attention by those responsible for oversight of the company's financial reporting.

A) potential misstatement
B) significant weakness
C) significant deficiency
D) fraud symptom

Signicant deficiency

The auditor obtains a sufficient understanding of internal control to assess the risk of material misstatement at the overall financial statement level and at the relevant assertion level (T/F)

True

Which of the following represents a correct statement regarding internal control testing?

A) When auditors plan to use evidence about the operating effectiveness of internal control contained in prior audits, auditing standards require tests of the controls' effectiveness at least every other year.

B) The greater the risk, the less audit evidence the auditor should obtain that controls are operating effectively.

C) The auditor uses control risk assessment and results of tests of controls to determine control risk which would then help determine planned detection risk and the related substantive tests for the financial statement audit.

D)Testing of internal controls can only be performed by the auditor at the end of the fiscal year

The auditor uses control risk assessment and results of tests of controls to determine control risk which would then help determine planned detection risk and the related substantive tests for the financial statement audit.

Tests of controls

A)are the procedures used to test the effectiveness of controls and determine control risk.

B)are used to support the ending balances in the balance sheet and income statement accounts.

C)are performed at the end of the audit.

D)are designed to detect fraud.

are the procedures used to test the effectiveness of controls and determine control risk

Which of the following is an accurate statement relating to the extent of procedures?
A) If an auditor wants a lower assessed control risk than the preliminary assessed control risk, the number of controls tested increases while the extent of the tests for each control decrease.
B) The extent of testing depends on the frequency of the operation of the controls.
C) All controls must be tested only at year-end.
D) The frequency of testing is the same for both manual and computer controls.

The extent of testing depends on the frequency of the operation of the controls.

Which of the following is a correct statement?

• The auditor uses the control risk assessment and results of tests of controls to determine planned detection risk.

• The auditor uses understanding of controls to assess the inherent risk.

• The audit risk model is used determine the level of acceptable audit risk.

• All of the above are correct statements.

The auditor uses the control risk assessment and results of tests of controls to determine planned detection risk

How must significant deficiencies and material weaknesses be communicated to those charged with governance?

 

Either oral or written communication is acceptable.

 

Oral communication is required.

 

Written communication is required.

 

Written communication is required for material weaknesses, but oral communication is allowed for significant deficiencies.

Written communication is required.

What type of opinion is issued when one or more material internal control weaknesses exist?

A) unqualified opinion
B) disclaimer of opinion
C) adverse opinion
E) qualified opinion

Adverse opinion

Which of the following is true regarding the auditor's opinion on the effectiveness of internal control?

A) The auditor is attesting to the effectiveness of internal controls as of the end of the fiscal year.

B) If the client remedies a material weakness before the end of the fiscal year, the auditor must still issue a qualified opinion or a disclaimer of opinion.

C) A scope limitation requires the auditor to issues an adverse opinion.

D) Section 404 requires that the auditor design the audit to detect all deficiencies in internal control.

The auditor is attesting to the effectiveness of internal controls as of the end of the fiscal year.

The auditor designs and performs a combination of tests of controls and substantive procedures to obtain reasonable assurance that the financial statements are fairly stated when control risk

A) is assessed above the maximum.

B) is assessed below the maximum.

C) cannot be assessed.

D) none of the above

is assessed below the maximum.

Collectively, procedures performed to obtain an understanding of the entity and its environment, including internal controls, represent the auditor's

 

audit strategy.

 

tests of controls.

 

risk assessment procedures.

 

tests of transactions.

risk assessment procedures

Which of the following would not be considered further audit procedures?

 

tests of controls

 

analytical procedures

 

tests of details of balances

 

risk assessment procedures

risk assessment procedures

Which of the following audit procedures are used to determine whether all six transaction-related audit objectives have been achieved for each class of transactions?

 

tests of controls

 

risk assessment procedures

 

substantive tests of transactions

 

preliminary analytical procedures

substantive tests of transactions

You are auditing Rodgers and Company. After performing substantive analytical procedures you conclude that, for the accounts tested, the client's balance appears reasonable. This may indicate that

 

details test of balances can be totally eliminated for those accounts.

 

certain tests of details of balances may be eliminated for those accounts.

 

control tests may be eliminated for those accounts.

 

control tests may be reduced for those accounts.

certain tests of details of balances may be eliminated for those accounts

In order to promote audit efficiency the auditor considers cost in selecting audit tests to perform. Which of the following audit tests would be the most costly?

 

substantive analytical procedures

 

risk assessment procedures

 

tests of controls

 

tests of details of balances

test of details of balances

If no material differences are found using analytical procedures, and the auditor concludes that misstatements are not likely to have occurred,

 

other substantive tests may be reduced.

 

it will be necessary to increase the tests of balances.

 

it will not be necessary to perform tests of balances.

 

it will be necessary to increase the tests of transactions.

other substantive tests may be reduced

When an auditor believes that analytical procedures indicate a reasonable possibility of misstatement, the auditor usually would

• Perform additional tests of controls

• Decide to modify tests of details of balances

NO, YES

Several factors influence the auditor's choice of the types of test procedures to select, including

 

the availability of the types of evidence.

 

the relative costs of each type of test.

 

the effectiveness of the internal controls.

 

all of the above.

all of the above

There is a direct relationship between the ________ transaction-related audit objective and the ________ balance-related audit objective.

 

occurrence; existence

 

timing; cutoff

 

posting and summarization; detail tie-in

 

all of the above

all of the above

What type of the following test is used to obtain the most audit evidence?

 

substantive tests of transactions

 

tests of controls

 

risk assessment tests

 

tests of details of balances

tests of detail of balances

Which audit tests involve physical examination and confirmation?

 

tests of controls

 

tests of transactions

 

tests of details of balances

 

analytical procedures

tests of details of balances

Transaction-related audit objectives would most likely be performed in which phase of the audit process?

 

plan and design audit approach

 

perform tests of controls and substantive tests of transactions

 

perform substantive analytical procedures and tests of details of balances

 

complete the audit and issue the audit report

perform tests of controls and substantive tests of transactions

Which of the following tests commonly occur together?

 

substantive tests of transactions and tests of controls

 

substantive tests of transactions and obtaining an understanding of internal controls

 

analytical procedures and tests of controls

 

tests of controls and tests of details of balances

substantive tests of transactions and tests of controls

Tests of controls and substantive tests of transactions are an important determinant of the extent of the auditor's use of tests of details of balances. Which of the following is true?

 

They are likely to be performed prior to the client's end of the fiscal year.

 

They are likely to eliminate the need for tests of details of balances.

 

They are likely to have no impact on the planned tests of details of balances.

 

They are likely to be used only in the audit of internal control

They are likely to be performed prior to the client's end of the fiscal year

If the auditor finds extensive control test deviations and significant misstatements while performing substantive tests of transactions and substantive analytical procedures,

 

the cost of the audit should decrease.

 

the auditor will conclude that internal controls are effective.

 

extensive tests of details of balances will need to be performed.

 

all of the above

extensive tests of details of balances will need to be performed

Which of the following is an account that is not affected by the sales and collection cycle?

 

cash

 

accounts receivable

 

allowance for doubtful accounts

 

accounts payable

accounts payable

Which of the following is not one of the five classes of transactions included in the sales and collection cycle?

 

sales returns and allowances

 

write-off of uncollectible accounts

 

bad debt expense

 

interest income

interest income

What event initiates a transaction in the sales and collection cycle?

 

receipt of cash

 

delivery of product to a customer

 

issuing a  bill to  the customer

 

customer order for goods or services

 

Customer order for goods and services

One type of shipping document is the ________, which is a written contract between the carrier and the seller in regard to the receipt and shipment of goods.

 

sales order

 

bill of lading

 

sales invoice

 

customer order

Bill of lading

The document used to indicate to the customer the amount of a sale and payment due date is the

 

sales invoice.

 

bill of lading.

 

purchase order.

 

sales order.

Sales invoice

Which of the following is not a business function within the "Sales" class of transactions?

 

processing customer orders

 

granting credit

 

processing and recording sales returns and allowances

 

shipping goods

processing and recording sales returns and allowances

The piece of paper that accompanies the customer's payment is the

 

credit memo.

 

remittance advice.

 

vendor invoice.

 

monthly statement.

Remittance advice

A ________ indicates a reduction in the amount due from a customer because of returned goods or an allowance.

 

bill of lading

 

sales invoice

 

credit memo

 

monthly statement

Credit memo

When designing audit procedures, tracing of source documents to the customers subsidiary ledger and to the general ledger is done to satisfy what assertion?

 

valuation

 

cutoff

 

completeness

 

classification

Completeness

In many audits, no substantive tests of transactions are made for the ________ assertion on the grounds that understatement of sales is not a concern.

 

accuracy

 

existence

 

completeness

 

none of the above

Completeness

Which of the following is an accurate statement relating to separation of duties?

 

Management should deny cash access to anyone responsible for entering sales and cash receipts transaction information into the computer.

 

All disagreements on the monthly statements should be directed to a designated person who has no responsibility for handling cash or recording sales or accounts receivable.

 

The credit granting function should be separate from the sales function.

 

All of the above are accurate statements.

all of the above are accurate statements

Which of the following is not a key control for sales and cash receipts?

 

active board of directors

 

adequate separation of duties

 

internal verification procedures

 

adequate documents and records

active board of directors

To test for fictitious sales, i.e. recorded sales for which there were no actual shipments, the auditor vouches from the

 

bill of lading to the sales journal.

 

sales journal to the shipping documents.

 

sales journal to the accounts receivable subsidiary ledger.

 

bill of lading to the supporting customer order and sales order.

sales journal to the shipping documents

Which of the following would least concern an auditor regarding the lack of a specific authorization to conduct the sales transaction?

 

granting of credit

 

shipment of goods

 

determination of price discounts

 

selling of goods for credit

selling of goods for credit

The accurate recording of sales transactions concerns all of the following except
for

 

proper credit approval before shipping.

 

shipping the amount of goods ordered.

 

accurately billing for the amount of goods shipped.

 

accurately recording the amount billed in the accounting records.

Proper credit approval before shipping

The two primary classes of transactions in the sales and collection cycle are

 

sales and sales discounts.

 

sales and cash receipts.

 

sales and sales returns.

 

sales and accounts receivable.

Sales and cash receipts

The appropriate and sufficient evidence to be obtained from tests of details of balances must be decided on an

 

efficiency basis.

 

effectiveness basis.

 

audit objective-by-audit objective basis.

Audit objective-by-audit objective basis

Which of the following types of receivables would not deserve the special attention of the auditor?

 

accounts receivables with credit balances

 

accounts that have been outstanding for a long time

 

receivables from related parties

 

each of the above would receive special attention.

 

each of the above would receive special attention

The understatement of sales and accounts receivable is best uncovered by

 

testing internal controls.

 

testing the aged accounts receivable trial balance.

 

substantive tests of transactions for shipments made but not recorded.

 

substantive tests of transactions for bad debts.

substantive tests of transactions for shipments made but not recorded

A listing of the balances in the accounts receivable master file at the balance sheet date, including individual customer balances outstanding and a breakdown of each balance by the time passed between the date of the sale and the balance sheet date, is the

 

customer list.

 

aged trial balance.

 

accounts receivable ledger.

 

schedule of accounts receivable.

Aged trial balance

An auditor is performing a credit analysis of customers with balances over 60 days due and assessing allowance for bad accounts. She is most likely obtaining evidence for which audit related objective?

 

realizable value

 

existence

 

completeness

 

occurrence

Realizable value

Confirmation of accounts receivable selected from the trial balance is the most common test of details of balances for the ________ of accounts receivable.

 

presentation

 

valuation

 

existence and accuracy.

 

detail tie-in

Existence and accuracy

If the client's internal control for recording sales returns and allowances is evaluated as ineffective,

 

a larger sample may be needed to verify sales returns.

 

sampling is not appropriate.

 

all sales returns must be traced to supporting documentation.

 

all sales returns must be confirmed with the customer.

a larger sample may be needed to verify sales returns

Which of the following audit procedures would not likely detect a client's decision to pledge or factor accounts receivable?

 

a review of the minutes of the board of directors' meetings

 

discussions with the client

 

confirmation of receivables

 

examination of correspondence files with banks

Confirmation of receivables

Which of the following most likely would be detected by a review of a client's sales cutoff?

 

excessive sales discounts

 

unrecorded sales for the year

 

unauthorized goods returned for credit

 

lapping of year-end accounts receivable

Unrecorded sales for the year

For effective internal control, employees maintaining the accounts receivable subsidiary ledger should not also approve

 

employee overtime wages.

 

sale price discounts.

 

write-offs of customer accounts.

 

cash disbursements.

 

Write-offs of customer accounts

An auditor selects a sample from the file of shipping documents to determine whether invoices were prepared. This test is to satisfy the audit objective of

 

accuracy.

 

existence.

 

control.

 

completeness.

Completeness

The net realizable value of accounts receivable is equal to:

 

gross accounts receivable less allowance for uncollectible accounts.

 

gross accounts receivable less bad debt expense.

 

gross accounts receivable less returns and allowances.

 

gross accounts receivable less sales discounts.

gross accounts receivable less allowance for uncollectible accounts

A positive confirmation is more reliable evidence than a negative confirmation because

 

fewer confirmations can be sent out.

 

the auditor has a document which can be used in court.

 

the debtor's lack of response indicates agreement with the stated balance.

 

follow-up procedures are performed if a response is not received from the debtor.

follow-up procedures are performed if a response is not received from the debtor

The positive (as opposed to the negative) form of receivables confirmation may be preferred when

 

internal control surrounding accounts receivable is considered to be effective.

 

there is reason to believe that a substantial number of accounts may be in dispute.

 

a large number of small balances are involved.

 

the auditor believes that the recipients of the confirmations will give the requests adequate consideration.

there is reason to believe that a substantial numbers of accounts may be in dispute

A petty cash fund would least likely be used to pay for which of the following items?

 

minor office supplies

 

monthly interest expense

 

stamps for small mailings

 

small contributions to a local charity

monthly interest expense

Which of the following misstatements is most likely to be uncovered during an audit of a client's bank reconciliation?

 

duplicate payment of a vendor's invoice

 

billing a customer at a lower price than indicated by company policy

 

failure to record in the cash account a collection of a customer payment by the bank on the client's behalf

 

payment to an employee for more than the hours actually worked

failure to record in the cash account a collection of a customer payment by the bank on the client's behalf

The general cash account is considered a significant account in almost all audits

 

where the ending balance is material.

 

no matter the ending cash balance is material or immaterial.

 

except those of not-for-profit organizations.

 

where either the beginning or ending balance is material.

 

no matter the ending cash balance is material or immaterial

The test of details of balances procedure that requires the auditor to foot the outstanding check and electronic payment list and deposits in transit and to compare the total with  the cash general  ledger balance is an attempt to satisfy which audit objective?

 

cutoff

 

presentation and disclosure

 

detail tie-in

 

completeness

Detail tie-in

A partial-period bank statement and the related copies of or digital access to cancelled checks, duplicate deposit slips, and other documents included in bank statements, mailed by the bank directly to the CPA firm's office, is called

 

a four-column proof of cash.

 

a year-end bank statement.

 

a cutoff bank statement.

 

a short-period bank statement.

A cutoff bank statement

Because cash is the most desirable asset for people to steal, it has a higher

 

control risk.

 

inherent risk.

 

detection risk.

 

liquidity risk.

Inherent risk

The audit procedure which requires the auditor to record the last check number used on the last day of the year and subsequently trace to the outstanding checks and the cash disbursements records to verify dates of the transactions is performed to satisfy the audit objective of

 

detail tie-in.

 

existence.

 

completeness.

 

cutoff.

cutoff

Which of the following items would not normally appear on bank reconciliations?

 

balance per bank

 

deposits in transit

 

outstanding deposits

 

outstanding checks

outstanding deposits

The important balance-related audit objectives in the audit of cash include all except which of the following?

 

existence

 

accuracy

 

completeness

 

occurrence

occurrence

The auditors test the client's monthly bank reconciliation to verify whether the client's recorded bank balance is the same amount as the actual cash in the bank. Which of the following would not explain a difference between the company's cash balance and the bank's balance for the client?

 

deposits in transit

 

Checks that are written by the client in the same month the checks clear the bank.

 

returned  checks

 

outstanding checks

checks that were written by the client in the same month the check clears the bank

When assessing risks affecting cash,

 

if a business defers preparing bank reconciliations for long periods, the value of the control is reduced and may affect the auditor's assessment of control risk for cash.

 

most companies are likely to have significant business risks affecting their cash balances.

 

there is a low inherent risk for the existence and completeness objectives for cash.

 

all of the above are accurate statements.

if a business defers preparing bank reconciliations for long periods, the value of the control is reduced and may affect the auditor's assessment of control risk for cash.

The auditor uses a proof of cash to determine whether

• All recorded cash disbursements were paid by the bank

• All amount that were paid by the bank were recorded

YES, YES

Based on the schedule of interbank transfers above, which of the cash transfers indicates an error in cash cutoff at December 31, 2015?

 

1

 

2

 

3

 

4

3