ACCT 5100 CHAPTER 30-MCQ (A+++++ GUARANTEE) 100%

If a bank does not respond to a bank confirmation request, an auditor may:

Perform alternative procedures

Send a second request

Ask the client to communicate with the bank to ask them to complete and return the confirmation

a.

No

Yes

Yes

b.

No

No

Yes

c.

Yes

No

Yes

d.

Yes

Yes

No

The most important controls for petty cash relate to:

The use of a separate bank account

The use of an imprest fund

a.

Yes

Yes

b.

No

No

c.

Yes

No

d.

No

Yes

Which of the following cash transfers results in a misstatement of cash at December 31, 2007?

       Bank Transfer Schedule

            Recorded           Disbursement                  Recorded           Date

            transfer  paid by              transfer              received

            in booksby bank             in books             by bank

a.          12/31/07            1/04/08             12/31/07                        12/31/07

b.          1/04/081/05/08             12/31/07                        1/04/08

c.          12/31/07            1/05/08             12/31/07                        1/04/08

d.          1/04/081/11/08             1/04/08             1/04/08

_____ is cash stolen from an organization before it is recorded in the accounting records.

a.          Theft

b.          Cash larceny

c.          Skimming

d.          Floating

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

a.     Existence

b.     Accuracy

c.     Completeness

d.     Occurrence

During his examination of a January 19, 2008 cutoff bank statement, an auditor noticed that the majority of checks listed as outstanding at December 31, 2007, had not cleared the bank. This would indicate:

a.          a high probability of kiting.

b.          a high probability of lapping.

c.          that the 2007 cash disbursements records had been closed prior to December 31, 2007.

d.          that the 2007 cash disbursements records had been held open past December 31, 2007.

The following information applies to the questions below:

Listed below are four interbank cash transfers, indicated by the numbers 1, 2, 3, and 4, of a client for late December 2007 and early January 2008:

            Bank Account One                      Bank Account Two

            Disbursing Date               Receiving Date

            (Month/Day)                  (Month/Day)

       Per Bank    Per Books          Per Bank       Per Books

1.     12/31         12/30                12/31            12/30

2.     1/2            12/30                12/31            12/31

3.     1/3            12/31                1/2               1/2

4.     1/3            12/31                1/2               12/31

Based on the schedule of interbank transfers above, which of the cash transfers indicates an error in cash cutoff at December 31, 2007?

a.          1

b.          2

c.          3

d.          4

Based on the schedule of interbank transfers above, which of the cash transfers would appear as a deposit in transit on the December 31, 2007 bank reconciliation?

a.          1

b.          2

c.          3

d.          4

Based on the schedule of interbank transfers above, which of the cash transfers would not appear as an outstanding check on the December 31, 2007 bank reconciliation?

a.          1

b.          2

c.          3

d.          4

Which of the following errors would be least likely to be discovered during the tests of the bank reconciliation?

a.       Payment was made to an employee for more hours than he worked.

b.       Cash received by the client subsequent to the balance sheet date was recorded as cash receipts in the current year.

c.       Payments on notes payable were debited directly to the bank balance by the bank were not entered in the client’s records.

d.       Deposits were recorded in the cash receipts records near the end of the year, deposited in the bank, and were included in the bank reconciliation as a deposit in transit.

When a customer fails to include a remittance advice with a payment, it is common practice for the person opening the mail to prepare one. Consequently, mail should be opened by which of the following four company employees?

a.          Receptionist.

b.          Sales manager.

c.          Credit manager.

d.          Accounts receivable clerk.

Which of the following balance-related objectives applies to auditing the general cash account?

Rights

Classification

Realizable value

a.

Yes

No

Yes

b.

No

Yes

No

c.

Yes

Yes

Yes

d.

No

No

No

A proof of cash is not an effective procedure for identifying which of the following types of misstatements?

a.     All recorded disbursements were paid by the bank.

b.     All recorded cash receipts were deposited.

c.     All amounts that were paid by the bank were recorded.

d.     Some checks were written for incorrect amounts.

The standard bank confirmation form has been agreed upon by the:

a.          SEC and FASB.

b.          AICPA and the SEC.

c.          SEC and the American Bankers’ Association.

d.          AICPA and the American Bankers’ Association.

Listing all bank transfers made a few days before and after the balance sheet date and tracing each to the accounting records for proper recording is a useful approach to test for:

a.          kiting.

b.          lapping.

c.          income smoothing.

d.          channel stuffing.

Under which of the following circumstances would an auditor be most likely to intensify an examination of a $500 imprest petty cash fund?

a.          Reimbursement occurs twice each week.

b.          The custodian endorses reimbursement checks.

c.          Reimbursement vouchers are not prenumbered.

d.          The custodian occasionally uses the cash fund to cash employee checks.

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

a.          board of directors.

b.          treasurer.

c.          controller.

d.          executive committee.

On the last day of the fiscal year, the cash disbursements clerk drew a company check on bank A and deposited the check in the company account in bank B to cover a previous theft of cash. The disbursement has not been recorded. The auditor will best detect this form of kiting by:

a.      examining the composition of deposits in both bank A and bank B subsequent to year-end.

b.      examining paid checks returned with the bank statement of the next account period after year-end.

c.       preparing, from the cash disbursements records, a summary of bank transfers for one week prior to and subsequent to year-end.

d.      comparing the detail of cash receipts as shown by the client’s cash receipts records with the detail on the confirmed duplicate deposit tickets for three days prior to and subsequent to year-end.

If an auditor “proves” the bank statement in the month subsequent to the balance sheet date, it is primarily a test for:

a.          errors.

b.          omissions.

c.          kiting.

d.          intentional misstatements.