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Exam 17: Audit of Cash Balances

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Question 21

Multiple Choice

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If the auditor does not obtain a cutoff statement directly from the bank for testing,an alternative procedure that the auditor can use is to

A) account for a continuity of cheques that covers the year end.
B) reconcile cash paid to the cash disbursements journal for the last month of the year.
C) reconcile cash received to the cash receipts journal for the last month of the year.
D) prove the bank statement for the period after the year end.

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Question 22

Multiple Choice

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There is a greater risk of defalcation for cash than for other types of assets because

A) it is easier to steal.
B) most other assets must be converted to cash to make them usable.
C) companies usually have weak internal controls surrounding cash.
D) most employees have access to cash.

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Question 23

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Under what circumstances would an auditor prepare a proof of cash?

You are the auditor of Brody Grass Inc.The CEO expressed a concern that the audit fees for the year were very high.You explained that this is largely due to poor internal controls in the cash and transaction cycle and that the audit fees could decrease if better controls were in place. Provide 5 examples of general cash account controls that Brody Grass Inc.could implement.

Disbursements on the bank transfer schedule should be correctly included in or excluded from year-end bank reconciliations as outstanding cheques.Understating outstanding cheques on the bank reconciliation indicates

The auditor has determined exchange rates used by the client to present cash in foreign currencies and has recalculated the amounts.Which audit assertion is associated with this audit procedure?

10)A)Distinguish between i)risks of error,ii)risks of fraud,and iii)risks of inadequate presentation or disclosure of financial information. B)For each of the three types of risks described in A),provide three examples of major risks of error or fraud in the cash cycle.

State the important factors the auditor should consider while understanding internal controls for cash.

A major consideration in the audit of the general cash balance is the possibility of fraud.The auditor must extend his or her procedures in the audit of year-end cash to determine the possibility of a material fraud when there are

From an audit perspective,an imprest bank account at a client can

When examining the bank reconciliation for the imprest payroll account,it is normal for the only reconciling item to be

A)Explain what is meant by kiting and discuss how it is performed.B)Discuss how an auditor can test for kiting.

Outline the audit procedures that would be performed when testing electronic receipts and payments.

Testing to ensure that bank transfers are recorded in both the receiving and disbursing banks helps to detect evidence

A four-column proof of cash can be performed for

What type of audit test is a proof of cash?

Which of the following statements best describes the position of cash on the balance sheet at most organizations that utilize effective cash management practices?

A)"Failure to bill a customer" is an example of an error that results in the failure to receive cash,but would not be discovered as part of the audit of the bank reconciliation.State three other examples of errors or irregularities that result in the improper payment of,or failure to receive,cash,but would not be discovered during the audit of the bank reconciliation.How are these types of misstatements normally uncovered in the audit? B)State three examples of errors or irregularities that normally would be uncovered during the audit of the bank reconciliation.

A)Explain what is meant by a cutoff bank statement and discuss the purpose of the cutoff bank statement in the audit of cash.B)Explain the purpose of testing the client's bank reconciliation and discuss the major audit procedures involved.

A)Describe each of the major types of cash accounts maintained by business entities.B)Discuss the advantages of using an imprest bank account for payroll transactions.