acct 241 ch 6

  1. The cash account is involved in which cycle?

    D. all of the above
  2. Which of the following is an appropriate audit program step for the review of canceled checks for authroized signatures?

    • B. examine a representative sample of signed checks and determine that
    • the signatures are authorized in the corporate signature book
  3. A proof of cash is noramlly used

    B. to test the transactions process when controls over cash are weak
  4. When counting cash on hand the auditor must exercise control over all cash and other negotiable assets to prevent

    C. subsitution of stolen funds
  5. When a fraud perpetrator embezzles company funds for the purpose of buying presents for co-workers, the fraudster's motive is said to be:

    C. economic
  6. An enlightened management can decrease the probability of fraud in the company best by:

    A. measuring performance and awarding bonuses on the basis of short-term operating results
  7. In order for internal auditors to be able to recognize potential fraud, they must be aware of the basic characteristics of fraud. Which of the following is a characteristic of fraud?

    D. taking unfair or dishonest advantage of uninformed individuals
  8. Which of the following statements is correct with respect to the elements of the "fraud triangle"?

    E. all of the above are correct
  9. When auditing with "fraud awareness," auditors should especially notice and follow up employee activities under which of these conditions?

    B. cash disbursement and bank statement reconciliation responsibilities are restricted to the cashier to improve accountable
  10. Which of the following gives an indication of potential fraudulent activity?

    C. internal auditor cannot locate several credit memos to support reductions of customer's balances
  11. Which of these arrangements of duties would least likely lead to an embezzlement or theft?

    • A. financial vice president received checks made out to suppliers and
    • the supporting invoices, signed the checks, and put them in the mail to
    • the payees
  12. When auditing with "fraud awareness," auditor should especially notice and follow up employee activities under which of these conditions?

    B. the company always estimates the inventory but never takes a complete physical count
  13. The best way to enact a broad fraud-prevention program is to:

    C. practice management "of the people and for the people" to help them share personal and professional problems
  14. Which of the following gives the least indication of fraudulent activity?

    B. bank reconciliation has no outstanding checks or deposits older than 15 days
  15. Which of the following combinations is a good means of hiding employee fraud but a poor means of carrying out managment (financial reporting) fraud?

    A. overstating sales revenue and overstating bad debt expense
  16. Which of the arrangements of duties could most likely lead to an embezzlement or theft?

    • A. inventory warehouse manager has responsibility for making the
    • physical inventory observation and reconciling discrepancies to the
    • perpetual inventory account
  17. Which of the following would the auditor consider to be an incompatible operation if the cashier recieves remittances?

    C. the cashier posts the receipts to the accounts receivable subsidiary ledger cards
  18. Embezzlement is a type of fraud that involves:

    D. an employee taking an employer's money or property entrusted to the employee's control in the employees normal job
  19. A code of ethics is an important element of fraud prevention program. Which of the following would diminish the effectiveness of a company's code of ethics?

    D. the violation of the code of ethics by senior managment
  20. Which of the following is an internal control activity that could prevent a paid disbursement voucher from being presented for payment a second time?

    C. the official signing of the check should compare the check with the voucher and should stamp "paid" on the voucher documents
  21. Which of the following is one of the better audit procedures that might be used by an auditor to detect kiting between intercompany banks?

    B. prepare a schedule of the bank transfer
  22. Immediately upon receipt of cash, a responsible employee should:

    D. prepare a remittance listing
  23. Upon receipt of customers' check in the mail room, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the:

    C. accounts receivable bookkeeper to update the subsidiary accounts receivable records
  24. Cash receipts from sales on account have been misaapropriated. Which of the following acts would conceal this defalcation and be least likely to be detected by an auditor?

    D. understating the sales journal
  25. During an audit of cash, the auditor is most concerned with the management assertion of:

    B. existence
  26. The auditor should ordinarily mail confirmation requests to all banks with which the client has conducted any business during the year, regardless of the year-end balance, because:

    D. the confirmation form also seeks information about indebtedness to the bank
  27. The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form may:

    D. be unaware of all the financial relationships that the bank has with the client
  28. Which of the following is one of the better auditing techniques to detect kiting?

    A. prepare a schedule of bank transfers from the client's books
  29. The cashier of Banker Company covered a shortage in his cash working fund with cash obtained on December 31 from a local bank by cashing an unrecorded check drawn on the company's New York bank. The auditor would discover this manipulation by:

    B. invetigating items returned with the bank cutoff statements
  30. A cash shortage may be concealed by transporting funds from one location to another or by converting negotiable assets to cash. Because of this, which of the following is vital?

    D. simultaneous surprise cash counts
Card Set
acct 241 ch 6
acct 241 ch 6