Which of the following controls represent a control over cash that is unique to cash accounts?

Which of the following controls represent a control over cash that is unique to cash accounts?

a. Separation of duties.
b. Restrictive endorsements of customer checks.
c. Periodic internal audits.
d. Competent, well-trained employees.










Answer: B

Which of the following terms best defines this scenario? The employee steals a payment from Customer X. To cover the theft, the employee applies a payment from Customer Y to Customer X's account. Before Customer Y has time to notice that its account has not been properly credited, the employee applies a payment from Customer Z to Customer Y's account.

Which of the following terms best defines this scenario? The employee steals a payment from Customer X. To cover the theft, the employee applies a payment from Customer Y to Customer X's account. Before Customer Y has time to notice that its account has not been properly credited, the employee applies a payment from Customer Z to Customer Y's account.

a. Skimming.
b. Kiting.
c. Collateralizing.
d. Lapping.








Answer: D

Affirmative answers to which of the following questions would lead the auditor to assess fraud risk at a higher level for cash or other liquid assets?

Affirmative answers to which of the following questions would lead the auditor to assess fraud risk at a higher level for cash or other liquid assets?

a. Is an individual with access to cash or its recording experiencing financial or personal distress?
b. Is an individual with access to cash or its recording being compensated at amount that he or she might consider low?
c. Is the company in potential violation of its debt covenants?
d. Is cash physically available to employees?
e. All of the above.








Answer: E

Which of the following questions would be relevant for an inherent risk analysis questionnaire related to cash?

Which of the following questions would be relevant for an inherent risk analysis questionnaire related to cash?

a. Does the company have significant cash flow problems in meeting its current obligations on a timely basis?
b. Are cash transactions properly authorized?
c. Are bank reconciliations performed on a timely basis by personnel independent of processing?
d. Does the internal audit department conduct timely reviews of the cash management and cash handling process?
e. All of the above.








Answer: A

Inherent risk for cash is usually assessed as high for which of the following reasons?

Inherent risk for cash is usually assessed as high for which of the following reasons?

a. The volume of transactions flowing through cash accounts throughout the year makes the account more susceptible to error.
b. The cash account is more susceptible to fraud because cash is liquid and easily transferable.
c. The electronic transfer of cash and the automated controls over cash are such that if errors are built into computer programs, they will be repeated on a large volume of transactions.
d. Cash can be easily manipulated.
e. All of the above.










Answer: E

Which of the following assertions is relevant to whether the cash balances reflect the true underlying economic value of those assets?

Which of the following assertions is relevant to whether the cash balances reflect the true underlying economic value of those assets?

a. Existence or occurrence.
b. Completeness.
c. Rights and obligations.
d. Valuation and allocation.
e. All of the above.







Answer: D

Which of the following assertions is relevant to whether the company has title to the cash accounts as of the balance sheet date?

Which of the following assertions is relevant to whether the company has title to the cash accounts as of the balance sheet date?

a. Existence or occurrence.
b. Completeness.
c. Rights and obligations.
d. Valuation and allocation.
e. All of the above.







Answer: C

Which of the following is the most relevant assertion with regards to the audit of cash?

Which of the following is the most relevant assertion with regards to the audit of cash? 

A. Existence
B. Rights and Obligations
C. Valuation and allocation.
D. Presentation and disclosure.









Answer: A

The ease with which cash can be stolen is most related to which of the following risks?

The ease with which cash can be stolen is most related to which of the following risks? 

A. Control Risk
B. Inherent Risk
C. Detection Risk
D. Liquidity Risk






Answer: B

How will the auditor most likely utilize the bank reconciliation as evidence in the audit of cash?

How will the auditor most likely utilize the bank reconciliation as evidence in the audit of cash? 

A. The auditor sends the reconciliation to the bank for independent verification.
B. The auditor performs the reconciliation for the client to record the proper cash balance.
C. The auditor traces the book balance of the reconciliation to the cut-off bank statement.
D. The auditor tests deposits-in-transit and outstanding items to other corroborating evidence.








Answer: D

Which of the following describes documents that accompany customer payments to help the clerk identify the payments?

Which of the following describes documents that accompany customer payments to help the clerk identify the payments? 

A. Receipts such as register tapes
B. Accommodation certificates such as authenticated customer tokens
C. Turnaround documents such as remittance advices
D. Checks stamped with restrictive endorsements such as customer signatures









Answer: C

Which one of the following is not a fundamental internal control the auditor would expect to find in place for a cash processing system?

Which one of the following is not a fundamental internal control the auditor would expect to find in place for a cash processing system? 

A. Segregation of duties
B. Electronic Payments
C. Authorization of transactions
D. Periodic internal audits







Answer: B

The cash account is significant to the auditor for which of the following reasons?

The cash account is significant to the auditor for which of the following reasons? 

A. The cash account is the culmination of a large volume of transactions.
B. The cash account is not as susceptible to fraud as most other accounts.
C. Cash is the only account that provides opportunity for fraud.
D. Automated systems do not possess the capability to maintain strong internal controls over cash.







Answer: A

The cut-off bank statement is used by the auditor to address which of the following concerns?

The cut-off bank statement is used by the auditor to address which of the following concerns? 

A. Lapping
B. Kiting
C. Omitting outstanding checks on reconciliations
D. All of the above







Answer: C

A common accounts receivable fraud is lapping. More sophisticated accounts receivable frauds involve

A common accounts receivable fraud is lapping. More sophisticated accounts receivable frauds involve

A. using journal entries to write off accounts against the allowance for doubtful accounts.
B. applying cash from one customer's receivable to that of another to cover the earlier deficit.
C. recording large discounts for the clients.
D. both A and C.








Answer: D

As cash processing systems become more automated and integrated, the general concept of segregation of duties

As cash processing systems become more automated and integrated, the general concept of segregation of duties

A. becomes less important.
B. becomes more important.
C. does not change.
D. becomes completely computerized without human interaction.









Answer: C

Clark Company has two bank accounts. In the table below, which of the transfers listed would indicate possible kiting between Bank A and Bank B? Bank A Dep. Bank A Dep. Bank B Tran. Bank B Tran. Per Books Per Bank Per Books Per Bank

Clark Company has two bank accounts. In the table below, which of the transfers listed would indicate possible kiting between Bank A and Bank B?
Bank A Dep. Bank A Dep. Bank B Tran. Bank B Tran.
Per Books Per Bank Per Books Per Bank

A. 12/29/01 1/2/02 1/2/02 1/3/02

B. 12/30/01 1/3/02 12/31/01 1/2/02

C. 1/4/02 1/2/02 1/2/02 1/4/02

D. 12/31/01 12/31/02 12/30/01 1/3/02










Answer: A