Chapter 10 Auditing Multiple Choice

Front 1

WHich of the following controls would most likely reduce the risk of diversion of customer receipts by a client's employees?

1. A bank lockbox system
2. Prenumbered remittance advices
3. Monthly bank reconcilliations
4. Daily deposit of cash receipts

Back 1

1. A bank lockbox system

Front 2

To provide assurance that each voucher is submitted and paid only once, the auditors most likely would examine a sample of paid vouchers and determine whether each voucher is:

1. Supported by a cendor's invoice.
2. Stamped "paid" by the check signer.
3. Prenumbered and accounted for
4. Approved for authorized purchases.

Back 2

2. Stamped "paid" by the check signer.

Front 3

In testing controls over cash disbursements, the auditors most likely would determine that the person who signs checks also:

1. Reviews monthly bank reconcilations
2. Returns the checks to accounts payable.
3. Is denied access to the supporting documents
4. Isresponsible for mailing the checks.

Back 3

4. Is responsible for mailing the checks.

Front 4

To gather eveidence regarding the balance per bank in a bank reconcilation, the auditors would examine any of the following EXCEPT:

1. Cutoff Bank statement
2. Year-end bank statement
3. Bank confirmation
4. General Ledger

Back 4

4. General Ledger

Front 5

You have been assigned to the year-end audit of a financial institution and are planning that timing of audit procedures relating to cash. You decide that it would be preferable to:

1. count the cash in advance of the balance sheet date in order to disclose any kiting operations at year-end.
2. Coordinate the count of cash with the cutoff of accounts payable
3.Coordinate the count of cash with the count of marketable securities and other negotioable assets.
4. Count the cash immediately upon the return of the confirmation letters from the financial instituation.

Back 5

3.Coordinate the count of cash with the count of marketable securities and other negotioable assets.

Front 6

Which of the following procedures would the auditors most likely perdorm o test controls relatingf to managements assertion about the completeness of cash receipts for cash sales at a retail outlet?

1. Observe the consistency of the employees use of cash registers and tapes.
2. Inquire about employees access to recorded but undepositied cash
3. Trace depositis in the cash receopts journal to the cash balance in the general ledger
4. Compare the cash baolance in the general ledger with the bank confirmation request.

Back 6

1. Observe the consistency of the employees use of cash registers and tapes.

Front 7

Reconciliation of the bank account should not be performed by an individual who also:

1. Process cash disbursements
2. Has custody of securities
3. Prepares the cash budget
4. Reviews invventory reports

Back 7

1. Process cash disbursements

Front 8

The auditors suspect that a client;s cashier is misapproprating cash receipts for personal use by lapping custerom checks receved in the mail. In attempting to uncover this embezzlement scheme, the auditors most likely would compare the:

1. Details of bank depositis slips with details od credits to customer accounts
2. Daily cash summaries with the sums of the cash receipts journla entires.
3. Individual bank deposit slips with the details of the monthy bank statements.
4. Dates uncollectible accounts are authorized to be written off with the dates the writeoffs are actually recorded.

Back 8

1. Details of bank depositis slips with details od credits to customer accounts

Front 9

In order to guard afainst the missappropriation of company-owned marketable securities, which of the following is the best course of actions that can be taken by comoany with a large portfolio of marketable securities?

1. Require that one trustworthy and bnded employee be responsible for access to the safekeeping area where securities are kept.
2. Require that employees who enter and leave the safekeeping area sign and record in a log the exact reason for their access.
3. Require that employees involved in the safekeeping function maintain a subsidiary control leger for securities on a current basis.
4. Require that the safekeeping function for securities be assigned to a bank or stockbroker that will act as a custodial agent.

Back 9

4. Require that the safekeeping function for securities be assigned to a bank or stockbroker that will act as a custodial agent.

Front 10

Hall Company had large amounts of funds to invest on temporart basis. The board od directors decided to purchase securities and derivatives and assigned the future purchase and sale decisions to a responsible financial executive. The best person or persons to make periodic reviews of the investment activity would be:

1. An investment commitee of the board of directors
2. The chief operating officer
3. The corporate controller
4. The treasure

Back 10

1. An investment commitee of the board of directors

Front 11

The auditors who physically examine securities insist that a client representative be present in order to:

1. Detect fradulent securities
2. Lend authority to the auditor's derectives
3. Acknowledge the receipt of securities returned
4. Coordinate the return of securities to the proper locaions

Back 11

3. Acknowledge the receipt of securities returned

Front 12

The best way to verify the amounts of divident revenue received during the year is:

1. Recomputation
2. Verification by reference to divident record books
3. Confirmation with divident-paying companies.
4. Examination of cash disbursements records.

Back 12

2. Verification by reference to divident record books