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MultipleChoiceQuiz

YourResults:
Thecorrectanswerforeachquestionisindicatedbya

1
INCORRECT

Thecashaccountisaffectedbythe
A) Revenuecycle.
B) Financingcycle.
C) Purchasingcycle.
D) Alloftheabove.

2
INCORRECT

Comparingthedatesforasampleofchequeswiththedatesthechequesclearedthebankisused
totest
A) Existence.
B) Cutoff.
C) Accuracy.
D) Authorization.

3CORRECT

Tracingasampleofentriesinthecashreceiptsjournaltodailydepositslipstestswhichofthe
followingassertionsforcash?
A) Occurrence.
B) Completeness.
C) Valuation.
D) Cutoff.

4
INCORRECT

Theauditorismostconcernedwithwhichmanagementassertionduringtheauditofcash
A) ValuationandAllocation.
B) RightsandObligations.
C) Existence.
D) PresentationandDisclosure.

5
INCORRECT

Kitingcanbestbedefinedasasituationinwhich
A) Anentityemployeeisdivertingdepositstohispersonalbankaccount.
B) Theentityfailstocompletebankreconciliationsonatimelybasis.
C) Anemployeefraudulentlycoversacashshortagebytransferringmoneyfromonebank
accounttoanother.
D) Entitychequesincludeunauthorizedsignatures.

6
INCORRECT

On31/12/13,HooverCo.erroneouslycreditedaccountspayable(Dr.CashCr.AccountsPayable)
foratransferoffundsbetweentwobankaccountsthatresultedinanoverstatementofbothcash
andaccountspayableatyearend.Thechequewasnotrecordeduntilitclearedthebankon
2/1/14.Whichofthefollowingprocedureswouldbeleasteffectiveindetectingthismisstatement?
A) Reviewofthe31/12/13bankreconciliationsforthe2bankaccounts.
B) Reviewofthescheduleofinterbanktransfers.
C) Reviewoftheaccountspayablesupportingdocumentationat31/12/13.
D) ReviewoftheDecemberchequeregisterforbothaccounts.

7
INCORRECT

Whichofthefollowingbestexplainswhyanauditorobtainsabankcutoffstatementin
connectionwithhis/herexaminationofyearendcashbalances?
A) Itisthebestavailableproceduretodetectkiting.

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MultipleChoiceQuiz

B) Entitieswithpoorliquiditymaybelikelytoaltertheyearendbankstatementamounts.
C) Itassistsinverifyingdepositsintransitandoutstandingchequesfromtheyearendbank
reconciliationonatimelybasis.
D) Itisrequiredperauditingstandardsiftheauditorisunabletoprepareabanktransfer
schedule.

8
INCORRECT

Anauditorordinarilysendsaconfirmationrequesttoallbankswithwhichtheentityhasdone
businessduringtheyearunderaudit,regardlessoftheyearendbalance.Onepurposeofthis
procedureisto
A) Providethedatanecessarytoprepareaproofofcash.
B) Requestthatacutoffbankstatementandrelatedchequesbesenttotheauditor.
C) Detectkitingactivitiesthatmayotherwisenotbediscovered.
D) Seekinformationaboutloansfromthebanks.

9CORRECT

Theprimaryevidenceregardingyearendbankbalancesisdocumentedinthe
A) Bankconfirmations.
B) Outstandingchequelisting.
C) Interbanktransferschedule.
D) Bankdepositleadschedule.

10
INCORRECT

Onreceivingthecutoffbankstatement,theauditorshouldvouch
A) Depositsintransitontheyearendbankreconciliationtodepositsinthecashreceipts
journal.
B) Chequesdatedbeforeyearendlistedasoutstandingontheyearendbankreconciliation
tothecutoffstatement.
C) Depositslistedonthecutoffstatementtodepositsinthecashreceiptsjournal.
D) Chequesdatedafteryearendtooutstandingchequeslistedontheyearendbank
reconciliationandtothecutoffstatement.

11
INCORRECT

ThefollowinginformationwastakenfromthebanktransferschedulepreparedfortheauditofSalt
ForkCo.Assumeallchequeswereactuallydatedandmailedon30/12.

Whichchequemaybeindicativeofkiting?
A) Cheque#1.
B) Cheque#2.
C) Cheque#3.
D) Cheque#4.

12
INCORRECT

Whichofthefollowingstatementsisfalseregardingafourcolumnbankreconciliationorproofof
cash?
A) Itisgenerallypreparedbyauditorsinsituationswhereinternalcontrolsinthecasharea
areconsideredveryweak.
B) Itcanbeeffectiveindetectingkitingsincecashreceiptsanddisbursementsarereconciled
withthoseonthebankstatement.
C) Itcanbeeffectivetoensurethatallcashdisbursementsrecordedintheentityscash

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MultipleChoiceQuiz

disbursementsjournalhaveclearedtheentitysbankaccount.
D) Itisoftenusedbytheauditortodetectcertaintypesoffraud.

13
INCORRECT

Theauditortypicallyusesthefollowingprocedurestodetectfraudinthecashaccounts:
A) Bankconfirmations.
B) Banktransferschedule.
C) Bankreconciliationprocedures.
D) Inquiriesofmanagement.

14
CORRECT

Whichofthefollowingistrueregardingpettycash?
A) Thepettycashfundshouldbemaintainedbysomeoneinvolvedinothercashfunctions.
B) Thepettycashfundisalmostalwaysthesubjectofheavysubstantivetesting.
C) Fewentitiesmaintainpettycashfundsbecauseoftheriskofdefalcation.
D) Auditorstypicallyperformlimitedtestingofthecontrolsoverthepettycashfund.

15
INCORRECT

Whichofthefollowingcontrolswouldmosteffectivelyensurethatthepropercustodyofassetsin
theinvestingprocessismaintained?
A) Directaccesstosecuritiesinthesafedepositboxislimitedtoonecorporateofficer.
B) Personnelwhopostinvestmenttransactionstothegeneralledgerarenotpermittedto
updatetheinvestmentsubsidiaryledger.
C) Purchaseandsaleofinvestmentsareexecutedonthespecificauthorizationoftheboard
ofdirectors.
D) Therecordedbalancesintheinvestmentsubsidiaryledgerareperiodicallycomparedwith
thecontentsofthesafedepositboxbyindependentpersonnel.

16
INCORRECT

Keysegregationsofdutiesforinvestmentsincludeallofthefollowingexcept:
A) Whoeverisresponsibleforinvestmentactivitiesshouldnotalsoensurethatalldividend
andinterestincomewasreceived.
B) Whoeverinitiatesthepurchaseofinvestmentsshouldnotalsograntfinalapproval.
C) Whoeveroverseessecurityvaluationshouldnotalsoacquiresecurities.
D) Whoevermaintainscustodyofthesecuritiesshouldnotalsoaccountforthesecurities.

17
INCORRECT

Toestablishtheexistenceandownershipofaninvestmentincommonstockofapubliccompany,
anauditorordinarilyperformsasecuritycountor
A) Determinesthemarketshareatthebalancesheetdateusingpublishedquotations.
B) Correspondswiththeinvesteeregardingthenumberofsharesowned.
C) Reliesontheinternalcontrolstructureiftheauditorhastestedthecontrolsandhas
reasonableassurancetheyareoperatingasprescribed.
D) Confirmsthenumberofsharesownedwithanindependentregistrar.

18
INCORRECT

Whichofthefollowingisnotaclassificationofinvestmentsecuritiesaccordingtointernational
accountingstandards?
A) Diversified.
B) Heldtomaturity.
C) Trading.
D) Availableforsale.

19
INCORRECT

Anauditortestinglongterminvestmentswouldordinarilyusesubstantiveanalyticalproceduresto
ascertainthereasonablenessofthe
A) Existenceofunrealizedgainsorlossesintheportfolio.
B) Completenessofrecordedinvestmentincome.

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C) Classificationbetweencurrentandnoncurrentportfolios.
D) Valuationofmarketableequitysecurities.

20
CORRECT

Toestablishtheexistenceandrightsofalongterminvestmentinthecommonstockofapublicly
tradedcompany,anauditorordinarilyperformsasecuritycountor
A) Reliesontheentitysinternalcontrolsiftheauditorhasreasonableassurancethatthe
controlactivitiesarebeingappliedasprescribed.
B) Confirmsthenumberofsharesownedthatareheldbyanindependentcustodian.
C) Determinesthemarketpricepershareatthebalancesheetdatefrompublished
quotations.
D) Confirmsthenumberofsharesownedwiththeissuingcompany.

21
INCORRECT

Whichofthefollowingislikelytobethemosteffectiveauditprocedureforverifyingdividends
earnedoninvestmentsinpubliclytradedequitysecurities?
A) Tracedepositsofdividendpaymentstothecashreceiptsbook.
B) Reconcilerecordedearningswiththedividendearningsreportedintheinvestmentbroker
statement.
C) Comparetheamountsreceivedwithprioryeardividendsreceived.
D) Recomputeselectedextensionsandfootingsofdividendschedulesandcomparetotalsto
thegeneralledger.

22
INCORRECT

Anauditorwouldmostlikelyverifytheinterestearnedonbondinvestmentsby
A) Vouchingthereceiptanddepositofinterestpayments.
B) Confirmingthebondinterestratewiththeissuerofthebonds.
C) Recomputingtheinterestearnedonthebasisoffaceamount,interestrate,andperiod
held.
D) Testingthecontrolsovercashreceipts.

23
CORRECT

Theauditfirmsvaluationexpertwouldlikelybebroughtintoassistintheauditoffairvalue
measurementsatanentitywhenthefollowingispresent:
A) Theentityisanewauditclient.
B) Significantuncertaintyexistsinkeyinputstotheentitysvaluationmodels.
C) TheentityhasafinancialinstrumentwithaLevel2input.
D) Theentityownsalargeanddiverseportfolioofpubliclytradedstock.

24
INCORRECT

Quotedpricesfromanactivemarketisanexampleofwhatlevelofvaluationcriteria?
A) Level1.
B) Level3.
C) Lowerlevel.
D) Basiclevel.

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