Ch 10 Flashcards
Describe circumstances that might cause the auditors to identify understatement of assets as a significant audit risk.
1.
Give two reasons audit work on cash is likely to be more extensive than might appear to be justified by the relative amount of the balance sheet figure for cash.
2
It is sometimes said that audit work on cash is facilitated by the existence of two independent records of the client’s cash transactions, which are available for comparison by the auditors. Identify these two independent records.
4
Explain how a lockbox system contributes to internal control over cash receipts.
5
The auditors’ work on cash may include preparing a description of controls and performing tests of controls. Which of these two steps should be performed first?
6
What is the purpose of tests of controls?
6
State one broad general objective of internal control over each of the following: cash receipts, cash disbursements, and cash balances.
7
Describe the audit implications of the Check Clearing for the 21st Century Act.
9
Prepare an example of lapping of cash receipts, showing actual transactions and the cash receipts journal entries.
11
What information do CPAs request from a financial institution on the standard confirmation form?
13
What action should be taken by the auditors when the count of cash on hand discloses a shortage?
15
Explain the objective of an audit procedure that is to obtain a cut off bank statement subsequent to the balance sheet date.
16
An audit procedure that compares paid checks returned with the bank statement to the list of outstanding checks in the previous reconciliation, what is the objective?
16
Explain the objective of an audit procedure that traces all bank transfers during the last week of the audit year and the first week of the following year.
16
Explain the objective of investigating any checks representing large or unusual payments to related parties.
16
