1multiple choice12Which of the following is not a control that generally is established over cash

receipts? A. To prevent abstraction of cash, a control listing of cash receipts should be prepared by
mailroom personnel. B. To insure accurate posting, the accounts receivable clerk should post the
customers' receipts from customers' checks. C. To insure accuracy of the accounts receivable records,
the records should be reconciled monthly to the accounts receivable controlling account. D. To prevent
theft of cash, receipts should be deposited daily.1. a
2. b
3. c
4. d
1
179_847656_
INCORRECT02multiple choice12In October, three months before year-end, the bookkeeper erroneously
recorded the receipt of a one year bank loan with a debit to cash and a credit to miscellaneous revenue.
The most effective method for detecting this type of error is: A. Foot the cash receipts journal for
October. B. Send a bank confirmation as of year-end. C. Prepare a bank reconciliation as of year-end. D.
Prepare a bank transfer schedule as of year-end.1. a
2. b
3. c
4. d
2
179_657483_
CORRECT13multiple choice12Kiting would least likely be detected by: A. Analyzing details of large cash
deposits around year-end. B. Comparing customer remittance advices with recorded disbursements in
the cash disbursements journal. C. Preparing a four-column bank reconciliation for all major cash
accounts. D. Preparing a schedule of interbank transfers by using the client's records and bank
statements around year-end.1. a
2. b
3. c
4. d
2
179_454897_
CORRECT14multiple choice12Which of the following is not a universal rule for achieving internal control
over cash? A. Separate recordkeeping from accounting for cash to the extent possible. B. Deposit each
day's cash receipts intact. C. Separate cash handling from recordkeeping. D. Have monthly bank
reconciliations prepared by employees not responsible for the issuance of checks.1. a
2. b
3. c
4. d
1
179_938903_
CORRECT15multiple choice12For internal control purposes, no checks are made payable to cash.1. True
2. False
2
179_916608_
INCORRECT06multiple choice12An internal control questionnaire indicates that an approved receiving
report is required to accompany every check request for payment of merchandise. Which of the
following procedures provides the best evidence on operating effectiveness? A. Select and examine
receiving reports and test whether the related canceled checks are dated no earlier than the receiving
reports. B. Select and examine receiving reports and test whether the related canceled checks are dated
no later than the receiving reports. C. Select and examine canceled checks and test whether the related
receiving reports are dated no earlier than the checks. D. Select and examine canceled checks and test
whether the related receiving reports are dated no later than the checks.1. a
2. b
3. c
4. d
4
179_473497_
CORRECT17multiple choice12Lapping of accounts receivable by an employee is not possible when there
is adequate segregation of duties with respect to cash disbursements. A. True B. False1. a
2. b
2
179_989184_
CORRECT18multiple choice12Which of the following is not a control that generally is established over
cash transactions? A. Separating cash handling from recordkeeping. B. Centralizing the receipt of cash. C.
Depositing each day's receipts intact. D. Obtaining a receipt for every disbursement.1. a
2. b
3. c
4. d
4
179_196332_
CORRECT19multiple choice12Banks 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. Public Company
Accounting Oversight Board's Standard No. 2. C. Foreign Corrupt Practices Act. D. Sarbanes-Oxley Act.1.
a
2. b
3. c
4. d
1
179_146604_
CORRECT110multiple choice12Which procedure is an auditor most likely to use to detect a check
outstanding at year-end that was not recorded as outstanding on the year-end bank reconciliation? A.
Prepare a bank transfer schedule using the client's cash receipts and cash disbursements journal. B.
Receive a cutoff statement directly from the client's bank. C. Prepare a four column bank reconciliation
using the year-end bank statement. D. Confirm the year-end balance using the standard form to confirm
account balance information with financial institutions.1. a
2. b
3. c
4. d
2
179_641615_
CORRECT111multiple choice12The auditors should insist that a representative of the client be present
during the physical examination of securities in order to: A. Lend authority of the auditor's directives. B.
Detect forged securities. C. Coordinate the return of all securities to proper locations. D. Acknowledge
the receipt of securities returned.1. a
2. b
3. c
4. d
4
179_421408_
CORRECT112multiple choice12In a manufacturing company which one of the following audit procedures
would give the least assurance of the existence of the assets in the general ledger balance of investment
in stocks and bonds at the audit date? A. Confirmation from the broker. B. Inspection of year-end
brokers' statements. C. Vouching all changes during the year to brokers' advises and statements. D.
Examination of paid checks issued in payment of securities purchased.1. a
2. b
3. c
4. d
4
179_985540_
CORRECT113multiple choice12Which of the following is correct concerning "window dressing" for cash?
A. A segregation of duties within the cash function effectively eliminates its occurrence. B. It generally
involves manipulation of inventory. C. It is illegal, and an audit is designed to provide reasonable
assurance of its detection. D. Many forms of it require no action by the auditors.1. a
2. b
3. c
4. d
4
179_707055_
CORRECT114multiple choice12Mailroom personnel of a company should prepare a control listing of
incoming cash receipts and deposit them intact daily. A. True B. False1. a
2. b
2
179_534585_
CORRECT115multiple choice12On receiving the bank cutoff statement, the auditor should trace: 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 deposits in the cash receipts journal. D. Checks dated subsequent to
year-end to the outstanding checks listed on the year-end bank reconciliation.1. a
2. b
3. c
4. d
2
179_169742_
CORRECT116multiple choice12Which of the following is the best audit procedure for the detection of
lapping? A. Comparison of postings of cash receipts to accounts with the details of cash deposits. B.
Confirmation of the cash balance. C. Reconciliation of the cash account balances. D. Preparing a proof of
cash.1. a
2. b
3. c
4. d
1
179_988868_
CORRECT117multiple choice12Contact 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.1. a
2. b
3. c
4. d
2
179_478441_
CORRECT118multiple choice12A 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.
Completeness. B. Existence. C. Fairness. D. Presentation and Disclosure.1. a
2. b
3. c
4. d
4
179_407633_
CORRECT119multiple choice12A proof of cash is an audit procedure that is performed on almost every
engagement. A. True B. False1. a
2. b
2
179_733253_
CORRECT120multiple choice12Which of the following is correct relating to kiting? A. It is ordinarily used
to understate cash. B. It is more difficult to accomplish in an electronic environment as contrasted to a
non-electronic environment. C. It is a lapping approach performed using receivable accounts. D. It is
seldom, if ever, used.1. a
2. b
3. c
4. d
2
179_835805_
CORRECT121multiple choice12For purposes of an audit of financial statements, electronic confirmation
of cash balances: A. Is acceptable when properly controlled. B. Is acceptable, but only when combined
with a non-electronic approach. C. Is only acceptable for immaterial accounts. D. Is not acceptable.1. a
2. b
3. c
4. d
1
179_482095_
CORRECT122multiple choice12An auditor's analytical procedures have revealed that the accounts
receivable of a client have doubled since the end of the prior year. However, the allowance for doubtful
accounts, as a percentage of accounts receivable remained about the same. Which of the following
client explanations most likely would satisfy the auditor? A. Credit standards were liberalized in the
current year. B. Twice as many accounts receivable were written off in the prior year as compared to this
year. C. A greater percentage of accounts were currently listed in the "more than 90 days overdue"
category than in the prior year. D. The client opened a second retail outlet in the current year and its
credit sales approximately equaled the older, established outlet.1. a
2. b
3. c
4. d
4
179_968329_
CORRECT123multiple choice12Which of the following is not confirmed on the standard confirmation
form used for cash balances at financial institutions? A. Cash checking account balances. B. Cash savings
account balances. C. Loans payable. D. Securities held for the client by the financial institution.1. a
2. b
3. c
4. d
4
179_433732_
CORRECT124multiple choice12The auditors should count small petty cash funds at year-end to make
sure that balance is not understated on the financial statements. A. True B. False1. a
2. b
2
179_838675_
CORRECT125multiple choice12Verification of cash and other liquid assets on the same date may prevent
substitution of one form of asset for another. A. True B. False1. a
2. b
1
179_466475_
CORRECT126multiple choice12Properly designed internal control will permit the same employee to: A.
Receive and deposit checks, and also approve write-offs of customer accounts. B. Approve vouchers for
payment, and also receive and deposit cash. C. Reconcile the bank statements, and also receive and
deposit cash. D. Sign checks, and also cancel supporting documents.1. a
2. b
3. c
4. d
4
179_84031_
CORRECT127multiple choice12The auditors compare information on canceled checks with information
contained in the cash disbursement journal. The objective of this test is to determine that: A. Recorded
cash disbursement transactions are properly authorized. B. Proper cash purchase discounts have been
recorded. C. Cash disbursements are for goods and services actually received. D. No discrepancies exist
between the data on the checks and the data in the journal.1. a
2. b
3. c
4. d
4
179_301145_
CORRECT128multiple choice12The auditors use a bank cutoff statement to compare: A. Deposits in
transit on the year-end cash general ledger account 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 statement.1. a
2. b
3. c
4. d
2
179_213836_
CORRECT129multiple choice12For internal control purposes, voided checks are torn up and destroyed.1.
True
2. False
1
179_367490_
CORRECT130multiple choice12Which one of the following would the auditor consider to be an
incompatible operation if the cashier receives remittances from the mailroom? A. The cashier prepares
the daily deposit. B. The cashier makes the daily deposit at a local bank. C. The cashier posts the receipts
to the accounts receivable subsidiary ledger. D. The cashier endorses the checks.1. a
2. b
3. c
4. d
3
179_837947_
CORRECT1TOTAL POINTS GAINED28