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1 | |
A local gas station has one clerk that accepts cash payments for gas and rings them up on the cash register. Which of the following would be the best control to provide assurance that the cashier isn't keeping some of the cash? |
| | A) | Count all cash before and after the shift and compare it to cash register totals. |
| | B) | Require that each customer be given a receipt of their purchase. |
| | C) | Compare cash register totals to a total that is automatically generated by each gas pump. |
| | D) | Require that each employees have a separate cash drawer that only they use. |
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2 | |
The accounting functions and the cash receipts functions should be handled by which department(s)? |
| | A) | Both functions should be under the control of the company Treasurer |
| | B) | Both functions should be under the control of the company Controller |
| | C) | The Controller should have control of accounting functions and the Treasurer should have control of cash receipt functions. |
| | D) | The Treasurer should have control of accounting functions and the Controller should have control of cash receipt functions. |
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3 | |
The auditor uses a bank cutoff statement to compare: |
| | A) | Deposits in transit on the year-end bank reconciliation to deposits in the cash receipts journal. |
| | B) | Checks dated prior to year-end to the outstanding checks listed on the year-end bank reconciliation. |
| | C) | Deposits listed on the cutoff statement to disbursements in the cash disbursements journal. |
| | D) | Checks dated subsequent to year-end to the outstanding checks listed on the year-end bank reconciliation. |
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4 | |
It is most likely to be efficient to test the controls over financial investments when: |
| | A) | Controls are thought to be weak. |
| | B) | Substantive tests may be performed. |
| | C) | Analytical procedures are possible. |
| | D) | The company trades or holds a large number of securities. |
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5 | |
To gather evidence regarding the balance per bank on a bank reconciliation, an auditor could examine all of the following except: |
| | A) | Cutoff bank statement. |
| | B) | Year-end bank statement. |
| | C) | Bank confirmation. |
| | D) | General ledger. |
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6 | |
What is the risk that is of most concern to auditors when auditing cash? |
| | A) | Detective risk. |
| | B) | Inherent risk. |
| | C) | Adjunct risk. |
| | D) | Nonsampling risk. |
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7 | |
Which of the following is most likely to indicate fraud? |
| | A) | Several overpayments are made for goods received from a supplier. |
| | B) | The year end cash balance does not include cash in transit to the company at year-end. |
| | C) | A check received after year end was inadvertently recorded as if received before year-end. |
| | D) | A documented loan to an officer of the company. |
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8 | |
An auditor examining check disbursements discovered a missing check number. Upon inquiry to the person responsible for disbursements and reconciliation of the cash account, she is told that the check number is missing because the check was voided. What is the auditor's next step? |
| | A) | Prepare a bank transfer schedule at to identify the check. |
| | B) | Examine the bank confirmation to determine whether the check cleared. |
| | C) | Since the person responsible for disbursements also reconciles the account, no additional procedures are necessary. |
| | D) | Examine the voided checks file to determine whether the check is in the file. |
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9 | |
Of the following, which procedure or document is most effective for detecting kiting? |
| | A) | A bank cutoff statement. |
| | B) | A bank reconciliation. |
| | C) | A bank kiting statement. |
| | D) | A proof of cash. |
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10 | |
Jones embezzled $50,000 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. This is an example of: |
| | A) | Lapping. |
| | B) | Kiting. |
| | C) | Effective cash management. |
| | D) | Related party transactions. |
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11 | |
A security owned by a company is from another company that recently declared bankruptcy. Which of the following is the auditor's primary concern with the investment? |
| | A) | Existence. |
| | B) | Presentation. |
| | C) | Completeness. |
| | D) | Valuation. |
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12 | |
A company owns a large amount of debt securities that pay interest twice a year - August 1 and February 1. On the financial statements the company accrued the 5 months of interest it was due as interest receivable. The auditor should: |
| | A) | Require the accrual be reversed since the interest has not yet been paid. |
| | B) | Confirm the interest accrual with the security issuer. |
| | C) | Require the accrual be reversed since the company could sell the security before interest has been paid. |
| | D) | Verify the company owns the security, check the accuracy of the accrual, and require no adjustment. |
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13 | |
A four column bank reconciliation ("proof of cash") will generally assist an auditor in detecting: |
| | A) | An unrecorded (on the books) deposit made at the beginning of the month; the amount was withdrawn late in the month, again with no book entry. |
| | B) | A second payment of a liability that had already been paid in full. |
| | C) | A check written and recorded on the books for $2,000, not $200 the amount of the actual liability. |
| | D) | An embezzlement of a portion of the company's petty cash. |
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14 | |
Which of the following is confirmed on the standard form used for cash balances at financial institution? |
| | A) | Factored accounts receivable. |
| | B) | FASB #5 loss contingencies. |
| | C) | Loans payable. |
| | D) | Safe deposit boxes controlled by the entity. |
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