d. intentional misstatements.
53. easy What is the most important internal control over petty cash?
Answer: The most important internal control over petty cash is the use of an imprest fund that is the responsibility of one person.
54. easy Discuss two analytical procedures commonly performed during the audit of the cash account.
It is common for auditors to compare the ending balance on the bank reconciliation, deposits in transit, outstanding checks, and other reconciling items with the prior year’s reconciliation. Similarly, auditors normally compare the ending balance in cash with previous months’ balances.
55. easy Explain what is meant by a cutoff bank statement, and discuss the purpose of the cutoff bank statement in the audit of cash.
A cutoff bank statement is a partial-period bank statement and the related canceled checks, duplicate deposit slips, and other documents included in bank statements, mailed by the bank directly to the CPA firm’s office. The purpose of the cutoff bank statements is to verify the reconciling items on the client’s year-end bank reconciliation with evidence that is inaccessible to the …show more content…
64. challenging Many auditors prove the subsequent period bank statement if a cutoff statement is not received directly from the bank. Discuss the purpose of proving the subsequent period statement, and explain the audit procedures performed during the proof.
The purpose of such a proof is to test whether the client’s employees have omitted, added, or altered any of the documents accompanying the cutoff statement received from the client. The audit procedures include footing all the canceled checks, debit memos, deposits, and credit memos; checking to see that the bank statement balances when the footed totals are used; and reviewing the items included in the footings to make sure that they were canceled by the bank in the proper period and do not include any erasures or alterations.
Other Objective Answer Format Questions
65. medium Match six of the terms (a-k) with the descriptions/definitions provided below (1-6):
a. Bank reconciliation
b. Branch cash account
c. Cash equivalents
d. Cutoff bank statement
e. General cash account
f. Imprest payroll account
g. Imprest petty cash fund