1) The auditors should count small petty cash funds at year-end to make sure that balance is not understated on the financial statements. TRUE b.

1) The auditors should count small petty cash funds at year-end to make sure that balance is not understated on the financial statements. a. TRUE b. FALSE

2) Mailroom personnel of a company should prepare a control listing of incoming cash receipts and deposit them intact daily.0 a. TRUE b. FALSE

institutions with which the client has a cash balance at year-end. a. TRUE b. FALSE

as a noncurrent asset a. TRUE b. FALSE

4)A compensating balance agreement generally requires that cash be reclassified as a noncurrent asset. a. TRUE b. FALSE

would satisfy the auditor? a. Credit standards were liberalized in the current year.compared to this year. c. A greater percentage of accounts were currently listed in the “more than 90 days overdue” category than in the prior year. d. The client opened a second retail outlet in the current year and its credit sales approximately equaled the older, established outlet.Answer (c) 6) By preparing a four-column bank reconciliation (“proof of cash”) at year-end, an auditor will generally not be able to detect: a. An unrecorded deposit made at the bank at the end of the month. b. A second payment of an account payable which had already been paid in full two months earlier. c. An unrecorded check cashed during that month. d. A bank charge during the month not recorded on the books.7) Which of the following statements is not correct? a. Cash is important to the audit process because of its vulnerability to misappropriation, despite the fact that the balance at the balance sheet date may be immaterial. b. Payroll cash account balances kept on an imprest basis are more easily controlled than others not so kept. c. Confirmation of cash should only be performed as of the balance statement date because the auditor expresses an opinion as of that date. d. Reviewing interbank transfers is important to the auditor because of the possibility that the client may be engaged in kiting.8) Which of the following is not a control that generally is established over cash receipts? a. To prevent abstraction of cash, a control listing of cash receipts should be prepared by mailroom personnel. b. To insure accurate posting, the accounts receivable clerk should post the customers’ receipts from customers’ checks. c. To insure accuracy of the accounts receivable records, the records should be reconciled monthly to the accounts receivable controlling account. d. To prevent theft of cash, receipts should be deposited daily.9) Jones embezzled $10,000 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. Which of the following is most likely to be effective in detecting this fraud? a. Bank confirmation. b. Bank transfer schedule prepared using only the cash receipts and cash disbursements journals. c. Comparison of bank cutoff statement to the cash receipts and disbursements records. d. Receivable confirmation.10) Which of the following is not confirmed on the standard form used for cash balances at financial institutions? a. Cash checking account balances. b. Cash savings account balances. c. Loans payable. d. Securities held for the client by the financial institution.11)The auditors’ count of the client’s cash should be coordinated to coincide with the: a. Consideration of the internal controls with respect to cash. b. Close of business on the balance sheet date. c. Count of investment securities. d. Count of inventories.12) As one of the year-end audit procedures, the auditor instructed the client’s personnel to prepare a confirmation request for a bank account that had been closed during the year. After the client’s treasurer has signed the request, it was mailed by the assistant treasurer. What is the major flaw in this audit procedure? a. The confirmation request was signed by the treasurer. b. Sending the request was meaningless because the account was closed before the year end. c. The request was mailed by the assistant treasurer. d. The CPA did not sign the confirmation request before it was mailed.13 )A company’s decision to use the fair value option for valuation of marketable securities is most likely to affects which of the following assertions the most? a. Completeness. b. Existence. c. Fairness. d. Presentation and Disclosure 14) Properly designed internal control will permit the same employee to: a. Receive and deposit checks, and also approve write-offs of customer accounts. b. Approve vouchers for payment, and also receive and deposit cash. c. Reconcile the bank statements, and also receive and deposit cash. d. Sign checks, and also cancel supporting documents