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1. (1) Your client left the cash receipts journal...

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1. (1) Your client left the cash receipts journal open after year-end for an extra day and included January 1 cash receipts in the 12/31/XX totals. All of those cash receipts were due to cash sales. Assuming the client uses a periodic inventory system with a 12/31/XX count of the physical inventory, which of the following is most likely to be true relating to the year XX financial statements? Sales are understated. Accounts receivable are understated. Inventory is overstated. Net income is overstated. 2. (1) By preparing a four-column bank reconciliation ("proof of cash") at year-end, an auditor will generally not be able to detect: An unrecorded deposit made at the bank at the end of the month. A second payment of an account payable which had already been paid in full two months earlier. An unrecorded check cashed during that month. A bank charge during the month not recorded on the books. 3. (1) Which of the following is not a control that generally is established over cash transactions? Separating cash handling from recordkeeping. Centralizing the receipt of cash. Depositing each day's receipts intact. Obtaining a receipt for every disbursement. 4. (1) Tracing recorded sales transactions in the sales journal to the shipping documents (bills of lading) provides evidence about the: Completeness of recording of sales transactions. Occurrence of sales transactions. Billing of all sales transactions. Presentation of payables. 5. (1) Which of the following manipulations of cash transactions would overstate the cash balance on the financial statements? Understatement of outstanding checks. Overstatement of outstanding checks. Understatement of deposits in transit. Overstatement of bank services charges. 6. (1) In 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? Confirmation from the broker. Inspection of year-end brokers' statements. Vouching all changes during the year to brokers' advises and statements. Examination of paid checks issued in payment of securities purchased. 7. (1) The Standard Form to Confirm Account Balances with Financial Institutions includes information on all of the following except: Date due of a direct liability. The principal amount paid on a direct liability. Description of collateral for a direct liability. The interest rate of a direct liability. 8. (1) To gather evidence regarding the balance per bank in a bank reconciliation, an auditor could examine all of the following except Cutoff bank statement. Year-end bank statement. Bank confirmation. General ledger. 9. (1) Which of the following procedures in the cash disbursements cycle should not be performed by the accounts payable department? Comparing the vendor's invoice with the receiving report. Canceling supporting documentation after payment. Verifying the mathematical accuracy of the vendor's invoice. Preparing the check for signature by an authorized person. 10. (1) When a client engages in transactions involving derivatives, the auditor should Develop an understanding of the economic substance of each derivative. Confirm with the client's broker whether the derivatives are for trading purposes. Notify the audit committee about the risks involved in derivative transactions. Add an explanatory paragraph to the auditor's report describing the risks associated with each derivative. 11. (1) By preparing a four-column bank reconciliation ("proof of cash") at year-end, an auditor will generally not be able to detect: An unrecorded deposit made at the bank at the end of the month. A second payment of an account payable which had already been paid in full two months earlier. An unrecorded check cashed during that month. A bank charge during the month not recorded on the books. 12. (1) An auditor may obtain information on the December 31 month end balance per bank in which of the following? Picture Option A Option B Option C Option D 13. (1) The auditors use a bank cutoff statement to compare: Deposits in transit on the year-end cash general ledger account to deposits in the cash receipts journal. Checks dated prior to year-end to the outstanding checks listed on the year-end bank reconciliation. Deposits listed on the cutoff statement to disbursements in the cash disbursements journal. Checks dated subsequent to year-end to the outstanding checks listed on the year-end bank statement. 14. (1) Which of the following is not confirmed on the standard form used for cash balances at financial institutions? Cash checking account balances. Cash savings account balances. Loans payable. Securities held for the client by the financial institution. 15. (1) The Standard Form to Confirm Account Balances with Financial Institutions includes information on all of the following except: Date due of a direct liability. The principal amount paid on a direct liability. Description of collateral for a direct liability. The interest rate of a direct liability. 16. (1) The auditors compare information on canceled checks with information contained in the cash disbursement journal. The objective of this test is to determine that: Recorded cash disbursement transactions are properly authorized. Proper cash purchase discounts have been recorded. Cash disbursements are for goods and services actually received. No discrepancies exist between the data on the checks and the data in the journal. 17. (1) Which of the following is one of the better auditing techniques that might be used by an auditor to detect kiting? Review composition of authenticated deposit slips. Review subsequent bank statements and canceled checks received directly from the banks. Prepare a schedule of bank transfers. Prepare year-end bank reconciliations. 18. (1) Banks may process electronic "substitute checks" in place of customer written hard copy checks due to the: Check Clearing for the 21stCentury Act Public Company Accounting Oversight Board's Standard No. 2. Foreign Corrupt Practices Act. Sarbanes-Oxley Act 19. (1) When a client engages in transactions involving derivatives, the auditor should Develop an understanding of the economic substance of each derivative. Confirm with the client's broker whether the derivatives are for trading purposes. Notify the audit committee about the risks involved in derivative transactions. Add an explanatory paragraph to the auditor's report describing the risks associated with each derivative. 20. (1) An auditor compares annual revenues and expenses with similar amounts from the prior year and investigates all changes exceeding 10%. This procedure most likely could indicate that Fourth quarter payroll taxes were properly accrued and recorded, but were not paid until early in the subsequent year. Unrealized gains from increases in the value of available-for-sale securities were recorded in the income account for trading securities. The annual provision for uncollectible accounts expense was inadequate because of worsening economic conditions. Notice of an increase in property tax rates was received by management, but was not recorded until early in the subsequent year.,Why is it taking so long to approve?

 

Paper#4905 | Written in 18-Jul-2015

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