acct 241 ch 6

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acct 241 ch 6
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2010-08-06 11:28:56
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acct 241 ch 6
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  1. The cash account is involved in which cycle?
    a. revenue and collection
    b. acquistion and expenditure
    c. production and conversion
    d. all of the above
    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?
    a. compare the check date with the first cancellation date
    b. determine that all checks are to be signed by an individual authorized by the board
    c. examine a representative sample of signed checks and determine that the signatures are authorized in the corporate signature book
    d. confirm the signatures from a sample of checks directly from the bank
    • c. 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
    A. when lapping is suspected
    B. when control risk for cash is low
    C. to test the transactions process when controls over cash are weak
    D. for all engagements
    C. to test the transactions process when controls over cash are weak
    (this multiple choice question has been scrambled)
  4. When counting cash on hand the auditor must exercise control over all cash and other negotiable assets to prevent
    A. theft
    B. kiting
    C. lapping
    D. subsitution of stolen funds
    D. subsitution of stolen funds
    (this multiple choice question has been scrambled)
  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:
    A. psychotic
    B. egocentric
    C. ideological
    D. economic
    D. economic
    (this multiple choice question has been scrambled)
  6. An enlightened management can decrease the probability of fraud in the company best by:
    A. establishing work teams that share responsiblitlities, and bonuses based on collective efforts
    B. providing employees performance feedback that stresses negative observations on their work to increase performance
    C. measuring performance and awarding bonuses on the basis of short-term operating results
    D. restricting authority for profit objective determination to top management
    C. measuring performance and awarding bonuses on the basis of short-term operating results
    (this multiple choice question has been scrambled)
  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?
    A. lack of training
    B. negligence on the part of executive management
    C. taking unfair or dishonest advantage of uninformed individuals
    D. unintentional deception
    C. taking unfair or dishonest advantage of uninformed individuals
    (this multiple choice question has been scrambled)
  8. Which of the following statements is correct with respect to the elements of the "fraud triangle"?
    a. opportunity is a cause that presures people into action
    b. motive refers to a situation that allows someone with opportunity to carry out fraud
    c. a lack of integrity describes a person who does not stick to the social or organizational ethical code
    d. fraud is most common when motive and lack of integrity exist together
    e. all of the above are correct
    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?
    A. the company counts inventory on a cycle basis throughout the year without performing a complete inventory observation at year-end to improve efficiency
    B. the petty cash box is always locked in the desk of the custodian to improve security
    C. the board of directors reviews and approves all investment transactions to prevent unauthorized transactions
    D. cash disbursement and bank statement reconciliation responsibilities are restricted to the cashier to improve accountable
    D. cash disbursement and bank statement reconciliation responsibilities are restricted to the cashier to improve accountable
    (this multiple choice question has been scrambled)
  10. Which of the following gives an indication of potential fraudulent activity?
    A. the year end bank reconciliation has no outstanding checks or deposits older then 15 days
    B. numerous crecdit memos have been issued to the company's biggest customer
    C. internal auditor cannot locate several credit memos to support reductions of customer's balances
    D. no one was absent the day the auditors handed out the paychecks
    C. internal auditor cannot locate several credit memos to support reductions of customer's balances
    (this multiple choice question has been scrambled)
  11. Which of these arrangements of duties would least 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 records
    b. cashier prepared the bank deposit, endorsed the checks with a company stamp, took the cash and checks to the bank for deposit, and reconciled the bank statement
    c. accounts receivable clerk opens customer payments so she could make entries in the customers' accounts receivable subsidiary accounts
    d. 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
    • d. 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?
    A. the board of directors reviews and approves all investment transactions
    B. management has published a company code of ethics and sends frequent communications newsletters about it
    C. the company always estimates the inventory but never takes a complete physical count
    D. the petty cash box is always locked in the desk of the custodian
    C. the company always estimates the inventory but never takes a complete physical count
    (this multiple choice question has been scrambled)
  13. The best way to enact a broad fraud-prevention program is to:
    A. practice management "of the people and for the people" to help them share personal and professional problems
    B. place dedicated "hotline" telephone on walls around the workplace with direct communication to the company ethics officer
    C. name an "ethic officer" who is responsible for receiving and acting upon fraud tips
    D. install airtight control systems of checks and supervision
    A. practice management "of the people and for the people" to help them share personal and professional problems
    (this multiple choice question has been scrambled)
  14. Which of the following gives the least indication of fraudulent activity?
    A. numerous cash refunds have been made to different people at the same post office box address
    B. bank reconciliation has no outstanding checks or deposits older than 15 days
    C. 3 people were absent the day the auditor handed out the paychecks and have not bpicked them up 4 weeks later.
    D. internal auditor cannot locate several credit memos to support reductions of customers' balances
    B. bank reconciliation has no outstanding checks or deposits older than 15 days
    (this multiple choice question has been scrambled)
  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. understating interest expense and understating accrued interest payable
    B. overstating sales revenue and overstating bad debt expense
    C. overstating sales revenue and overstating customer accounts receivable balances
    D. omit the disclosure informatoin about related party sales to the president's relatives at below-market prices
    B. overstating sales revenue and overstating bad debt expense
    (this multiple choice question has been scrambled)
  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
    b. cashier prepared the bank statement, endoursed the checks with a company stamp, and took the cash and checks to the bank for deposit (no other bookkeeping duties)
    c. accounts receivable clerk received a list of payments received by the cashier so she could make entries in the customers' accounts receivable subsidiary accounts
    d. 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
    • 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?
    A. the cashier makes the daily deposit at a local bank
    B. the cashier prepares the daily deposit
    C. the cashier endorses the checks
    D. the cashier posts the receipts to the accounts receivable subsidiary ledger cards
    D. the cashier posts the receipts to the accounts receivable subsidiary ledger cards
    (this multiple choice question has been scrambled)
  18. Embezzlement is a type of fraud that involves:
    A. an employee taking an employer's money or property not entrusted to him or her
    B. an employee's mistaken representation of opinion that causes incorrect account entries
    C. a manager's falsification of financial statements for the purpose of misleading investors and creditors
    D. an employee taking an employer's money or property entrusted to the employee's control in the employees normal job
    D. an employee taking an employer's money or property entrusted to the employee's control in the employees normal job
    (this multiple choice question has been scrambled)
  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?
    A. the posting of the code of ethics in the company workplace
    B. the establishment of a chief ethics officer
    C. the violation of the code of ethics by senior managment
    D. the establishment of a hotline for reporting unethical behavior
    C. the violation of the code of ethics by senior managment
    (this multiple choice question has been scrambled)
  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?
    A. disbursement vouchers should be approved by at least 2 responsible managment officials
    B. the official signing of the check should compare the check with the voucher and should stamp "paid" on the voucher documents
    C. the date on a disbursement voucher should be within a few days of the date the voucher is presented for payment
    D. vouchers should be prepared by individuals who are responsible for signing disbursement checks
    B. the official signing of the check should compare the check with the voucher and should stamp "paid" on the voucher documents
    (this multiple choice question has been scrambled)
  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?
    A. prepare a schedule of the bank transfer
    B. prepare a year end bank reconciliation
    C. review composition of authenticated deposit slips
    D. review subsequent bank statements
    A. prepare a schedule of the bank transfer
    (this multiple choice question has been scrambled)
  22. Immediately upon receipt of cash, a responsible employee should:
    A. prepare a remittance listing
    B. update the subsidiary accounts recievable records
    C. prepare a deposit slip in triplicate
    D. record the amount in the cash receipts journal
    A. prepare a remittance listing
    (this multiple choice question has been scrambled)
  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:
    A. internal auditor to investigate the listing for unusual transactions
    B. accounts receivable bookkeeper to update the subsidiary accounts receivable records
    C. entity's bank to compare the listing with the cashier's deposit slip
    D. treasurer to compare the listing with the monthly bank statement
    B. accounts receivable bookkeeper to update the subsidiary accounts receivable records
    (this multiple choice question has been scrambled)
  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?
    A. overstating the sales journal
    B. overstating the accounts receivable control account
    C. overstating the accounts receivable subsidiary ledger
    D. understating the sales journal
    D. understating the sales journal
    (this multiple choice question has been scrambled)
  25. During an audit of cash, the auditor is most concerned with the management assertion of:
    A. valuation
    B. presentation
    C. existence
    D. rights
    C. existence
    (this multiple choice question has been scrambled)
  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:
    A. this procedure will detect kiting activities that would otherwise not be detected
    B. this procedure relieves the auditor of any responsibility with respect to nondetection of forged checks
    C. the confirmation form also seeks information about indebtedness to the bank
    D. the mailing of confirmation forms to all such banks is required by generally accepted auditing standards
    C. the confirmation form also seeks information about indebtedness to the bank
    (this multiple choice question has been scrambled)
  27. The usefulness of the standard bank confirmation request may be limited because the bank employee who completes the form may:
    A. sign and return the form without inspecting the accuracy of the client's bank reconciliation
    B. be unaware of all the financial relationships that the bank has with the client
    C. not believe the bank is obligated to verify confidential information to a 3rd party
    D. not have access to the client's bank statement
    B. be unaware of all the financial relationships that the bank has with the client
    (this multiple choice question has been scrambled)
  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
    B. review subsequent bank statements and cancelled checks recieved directly from the banks
    C. prepare year end bank reconciliations
    D. review composition of authenticated deposit slips
    A. prepare a schedule of bank transfers from the client's books
    (this multiple choice question has been scrambled)
  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:
    A. counting the cash working fund at the close of business on December 31
    B. confirming the December 31 bank balances
    C. invetigating items returned with the bank cutoff statements
    D. preparing independent bank reconciliations as of December 31
    C. invetigating items returned with the bank cutoff statements
    (this multiple choice question has been scrambled)
  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?
    A. simultaneous bank confirmations
    B. simultaneous bank reconciliations
    C. simultaneous surprise cash counts
    D. simultaneous four column proofs of cash
    C. simultaneous surprise cash counts
    (this multiple choice question has been scrambled)

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