5 Written Questions
5 Matching Questions
- An auditor examining check disbursements discovered a missing check number. Upon inquiry to the person responsible for disbursements and reconciliation of the cash account, she is told that the check number is missing because the check was voided. What is the auditor's next step? A-Prepare a bank transfer schedule at to identify the check. B-Examine the bank confirmation to determine whether the check cleared. C-Since the person responsible for disbursements also reconciles the account, no additional procedures are necessary. D-Examine the voided checks file to determine whether the check is in the file.
- Check Clearing for the 21st Centry Act "Check 21 Act" (401)
- A four column bank reconciliation ("proof of cash") will generally assist an auditor in detecting: A-An unrecorded (on the books) deposit made at the beginning of the month; the amount was withdrawn late in the month, again with no book entry. B-A second payment of a liability that had already been paid in full. C-A check written and recorded on the books for $2,000, not $200 the amount of the actual liability. D-An embezzlement of a portion of the company's petty cash.
- Jones embezzled $50,000 from his company's account in Bank A. At year-end he hid the shortage by making a deposit on December 31 in Bank A, drawn on Bank B. He has not recorded the transaction on the books. This is an example of: A-Lapping. B-Kiting. C-Effective cash management. D-Related party transactions.
- Window dressing (402)
- a ...
- b D-Examine the voided checks file to determine whether the check is in the file.
- c A-An unrecorded (on the books) deposit made at the beginning of the month; the amount was withdrawn late in the month, again with no book entry.
- d B-Kiting.
- e This act allows financial institutions to creat and process electronic "substitute checks" in place of customer written hard-copy checks. The purpose of this act is to drease the time for check clearing.
5 Multiple Choice Questions
- B-Checks dated prior to year-end to the outstanding checks listed on the year-end bank reconciliation.
- A-Controls are thought to be weak.
- D-They may be sent electronically or non-electronically.
- A bank statement covering a specified number of business days (usually 7-10) after the client's balance sheet date. Auditors use this statment to determin the checks issued on or before the blance sheet date and paid during the cutoff period were listed as outstanding on the year-end bank reconciliation. Another use is to determin the reconciling items shown on the year-end bank reconciliation have cleared the bank within a reasonable amout of time.
5 True/False Questions
Standard confirmation form (396) → A reference book published monthly by investment advisory services reporting detailed information concerning all listed and many unlisted securities; includes dividend dates and amounts, current prices of securities, and other condensed financial data.
Which of the following is most likely to indicate fraud? A-Several overpayments are made for goods received from a supplier. B-The year end cash balance does not include cash in transit to the company at year-end. C-A check received after year end was inadvertently recorded as if received before year-end. D-A documented loan to an officer of the company → A-Several overpayments are made for goods received from a supplier.
A security owned by a company is from another company that recently declared bankruptcy. Which of the following is the auditor's primary concern with the investment? A-Existence B-Presentation C-Completeness D-Valuation → B-Checks dated prior to year-end to the outstanding checks listed on the year-end bank reconciliation.
Voucher (386) → Financial instruments that "derive" their value from other financial instruments, underlying assets, or indexes. Examples are options, forward contracts, and futures contracts.
Kiting (402) → ...