Chapter 10 - Part 2

1.

1 point

The standard bank confirmation includes a designated place for the financial institution to report which of the following?

Loans and collateral.

A reconciliation of the lockbox.

Cash held on consignment.

Maturity dates for certificates of deposit.

2.

1 point

Which of the following is not a common test of control for marketable securities?

Review the minutes of the board meetings.

Review broker’s advice for accurate recording of security.

Inquire of management about its process for reclassifications.

Review reports of internal audits.

3.

1 point

The reported fair market value of securities held by the client can be verified by the auditor through which of the following procedures?

Comparing the values to those securities held by the auditing firm.

Confirming the fair values with the client as of the close of the year.

Comparing the fair values with the fair values of similar securities.

Comparing the fair values to credible publications and websites.

4.

1 point

Which of the following is required by accounting standards for the presentation and disclosure of investments in marketable securities?

By classification as trading, available-for-sale or held-to maturity.

For an analyst's determination of liquidity.

For the company's physical possession of the security versus agent holdings.

For the expected success of the organization of investment.

5.

1 point

The cutoff bank statement is used by the auditor to address which of the following concerns?

Lapping.

Kiting.

Omitting outstanding checks on reconciliations.

All of the above.

6.

1 point

Bank transfer schedules are used by the auditor to address which of the following concerns?

Lapping.

Kiting.

Embezzlement by omitting outstanding checks on reconciliation.

All of the above.

7.

1 point

Which of the following is not a normal edit test as part of computerized control for checks?

Field checks.

Self-checking digits.

Cross-references.

Reasonableness tests.

8.

1 point

Which of the following procedures does the auditor typically perform when testing the existence of cash?

Counting cash at the depository institution.

Inquiry of management.

Sending a standard bank confirmation.

Tracing the bank reconciliation to the general ledger.

9.

1 point

Which assertion related to investments is tested when the auditor examines the documents for any restrictions?

Existence.

Rights.

Completeness.

Valuation.

10.

1 point

Which of the following would not be used as part of analytical procedures for marketable securities?

Develop expectations about the level of amounts in ending balances.

Develop expectations about the relationship between the balances.

Verify ending balances prior to calculating the percent change.

Review changes in the balances, risk composition, and classification types.

11.

1 point

Which of the following would not be included as part of the documentation related to the substantive procedures for marketable securities?

A schedule of marketable securities prepared by the client.

Reports of any outside valuation experts.

Calculation of any potential impairments.

Policies over purchase or sale of marketable securities.

12.

1 point

Investments in securities are classified as which of the following?

Held-to-maturity.

Trading securities.

Available-for-sale securities.

All of the above.

13.

1 point

Which of the following is not a cash management technique frequently used by management?

Imprest funds.

Lockboxes.

Electronic funds transfers.

Cash management agreement with financial institutions.

All of the above.

14.

1 point

Which of the following items would not normally appear on bank reconciliations?

Balance per bank.

Outstanding deposits list.

Balance per books.

Outstanding checks list.

15.

1 point

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

Existence.

Rights and obligations.

Valuation and allocation.

Presentation and disclosure.

16.

1 point

Which of the following is not a reason for a client to employ cash management techniques?

Speed the collection and deposit of cash.

Reduce the effect of compensating balances.

Reduce the amount of paperwork.

Automate the cash management process.

17.

1 point

Which of the following would the auditor use to determine the existence of investments?

Footing the schedule of recorded investments.

Confirming or examining recorded investments.

A schedule of investments sold during the year.

Recomputing interest and/or gains and losses.

18.

1 point

When auditing marketable securities, the auditor will do which of the following?

Examine broker's advices evidencing purchase of securities.

Recompute income.

Foot schedule.

Both A and B.

All of the above.

19.

1 point

When testing cash balances at the balance sheet date, the auditor foots the bank reconciliation and traces its reported book balance to the trial balance and its bank balance to the standard confirmation. Which of the following assertions is being tested with these procedures?

Rights.

Valuation.

Existence.

All of the above.

20.

1 point

Which of the following would be used by the auditor to address kiting?

Cut-off bank reconciliations.

Bank transfer schedules.

Bank confirmations-account balances.

Bank confirmations-loan guarantees.

21.

1 point

Assume that an auditor notes a large series of checks that does not clear the bank for an unusually long time after period end. Which of the following would the auditor likely suspect from this observation?

Vendors are eager to get their payments.

The reconciliation is accurate.

Cash does not exist.

The presence of held-checks at period-end.

22.

1 point

Which of the following is not an internal control the auditor would expect to find in place for all cash processing systems?

Restrictive endorsement of checks.

Independent reconciliation.

Walkthrough.

Prenumbered cash receipt documents.

23.

1 point

The auditor prepares a schedule for marketable securities. Which of the following is not one of the items included related to the value of the securities?

Cost.

Year-end market value.

Carrying value for debt instruments.

Interest and dividends.