Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 9, Problem 25.1MCQ
To determine
Identify the correct answer for the given statement.
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1. The negative form of accounts receivable confirmation request is particularly useful except when
a. Individual account balances are relatively large
b. Internal control surrounding accounts receivable is considered to be effective
c. A large number of small balances are involved
d. The auditor has reason to believe the persons receiving the request are likely to give them consideration
2. The starting point for the verification of the balance in the general ledger account is to obtain
a. A bank reconciliation from the client
b. The client’s cash account from the general ledger
c. A cutoff bank statement directly from the bank
d. The client’s year-end bank statement
1. Which of the following substantive audit procedures is least likely to be performed by the auditor to gather evidence in support of outstanding checks?
a. Confirm directly with bank
b. Trace to cash disbursements journal
c. Ascertain reason for unusual delay
d. Trace items on the bank reconciliation to cutoff bank statements
When preparing a bank reconciliation, if the adjusted book balance and the adjusted bank balance are equal, then there is no need to have an external auditor test internal controls for the "cash" account.
True or False
Chapter 9 Solutions
Auditing And Assurance Services
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Provide two examples of factors that might...Ch. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQ
Ch. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - Prob. 13RQCh. 9 - Prob. 14RQCh. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - Prob. 17RQCh. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - Prob. 20RQCh. 9 - Prob. 21RQCh. 9 - Prob. 22RQCh. 9 - Prob. 23RQCh. 9 - Prob. 24RQCh. 9 - Prob. 25.1MCQCh. 9 - Prob. 25.2MCQCh. 9 - Prob. 25.3MCQCh. 9 - Prob. 26.1MCQCh. 9 - Prob. 26.2MCQCh. 9 - Prob. 26.3MCQCh. 9 - Prob. 27.1MCQCh. 9 - Prob. 27.2MCQCh. 9 - Prob. 27.3MCQCh. 9 - Prob. 28.1MCQCh. 9 - Prob. 28.2MCQCh. 9 - Prob. 28.3MCQCh. 9 - Prob. 29DQPCh. 9 - Prob. 30DQPCh. 9 - Prob. 31DQPCh. 9 - Prob. 33DQPCh. 9 - Prob. 34DQPCh. 9 - Prob. 35DQPCh. 9 - Prob. 36DQPCh. 9 - Prob. 37DQPCh. 9 - Prob. 39C
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- Which among the following types of audit evidence can be considered the most reliable? a.Verbal reply from management that the accounts receivable are fairly presented. b.Sales invoice with alteration submitted to the audit team by the company that has weak internal control. c.Photocopy of the building insurance document. d.Confirmation of cash balance directly obtained by the audit team leader from the bank.arrow_forwardWhich of the following fraudulent activities most likely could be perpetrated due to the lack of effective internal controls in the revenue cycle? a. Fictitious transactions may be recorded that cause an understatement of revenues and overstatement of receivables b. Claim received from customers for goods returned may be intentionally recorded in other customer’s accounts. c. Authorization of credit memos by personnel who receive cash may permit the misappropriation of cash d. The failure to prepare shipping documents may cause an overstatement of inventory balancesarrow_forwardThe following are examples of circumstances that may indicate the possibility that the financial statements may contain a material misstatement resulting from fraud, except Group of answer choices Last-minute adjustments that significantly affect financial results or unusual journal entries. Transactions that are recorded in a complete or timely manner or are properly recorded as to amount, accounting period, classification, or entity policy. Unsupported or unauthorized balances or transactions. Tips or complaints to the auditor about alleged fraud.arrow_forward
- Which of the following tests of details most likely would help an auditor determine whether accounts payable have been misstated?a. Examining reported purchase returns that appear too low. b. Examining vendor statements for amounts not reported as purchases. c. Searching for customer-returned goods that were not reported as returns. d. Reviewing bank transfers recorded as cash received from customers.arrow_forwardWhich of the following is most closely related to the relevance of audit evidence?a. Auditors decide to physically inspect investment securities held by a custodian instead of obtaining confirmations from the custodian.b. In addition to confirmations of accounts receivable, auditors perform an analysis of the aging of accounts receivable to evaluate the collectability of accounts receivable.c. In response to less effective internal control, auditors increase the number of customer accounts receivable confirmations mailed compared to that in the prior year.d. Because of a large number of transactions occurring near year-end, auditors decide to confirm a larger number of receivables following year-end instead of during the interim period.arrow_forwardItems 1 through 6 are questions typically found in a standardinternal control questionnaire used by auditors to obtain an understanding of internalcontrol for notes payable. In using the questionnaire for a client, a “yes” response indicatesa possible internal control, whereas a “no” indicates a potential deficiency.1. Are liabilities for notes payable incurred only after written authorization by a propercompany official?2. Are paid notes cancelled and retained in the company files?3. Is a notes payable master file maintained?4. Is a periodic reconciliation made of the notes payable master file with the actualnotes outstanding by an individual who does not maintain the master file?5. Is the individual who maintains the notes payable master file someone other thanthe person who approves the issue of new notes or handles cash?6. Are interest expense and accrued interest recomputed periodically by an individualwho does not record interest transactions?a. For each of the preceding…arrow_forward
- Explain why, in verifying bank reconciliations, most auditorsemphasize the possibility of a nonexistent deposit in transit being included in the reconciliation and an outstanding check being omitted rather than the omission of a depositin transit and the inclusion of a nonexistent outstanding checkarrow_forwardWhich of the following substantive procedures would auditors most likely perform to obtain evidence about the occurrence of subsequent events?a. Recompute a sample of large-dollar transactions occurring after the date of the financial statements for arithmetic accuracy.b. Investigate changes in shareholders’ equity occurring after the date of the financial statements.c. Send confirmations to vendors with whom the client normally does business but for which no balance in accounts payable is noted.d. Confirm bank accounts established after the date of the financial statements.arrow_forwardExplain why auditors usually emphasize the detection of fraud inthe audit of cash receipts. Is this consistent or inconsistent with the auditor’s responsibilityin the audit? Explain.arrow_forward
- Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?a. Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence.b. Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off.c. Write-offs must be approved by the cashier who is in a position to know whether the receivables have, in fact, been collected.d. Write-offs must be authorized by company field sales employees who are in a position to determine customers’ financial standing.arrow_forwardMULTIPLE CHOICE: 4. An auditor who is engaged to examine the financial statements of a business entity will request cutoff bank statement primarily in order to: A. Detect lapping B. Detect kiting C. Verify reconciling items on the client’s bank reconciliation D. Verify the cash balance reported on the bank confirmation inquiry form 5. Which of the following auditing procedures would the auditor not apply to a cutoff bank statement? A. Trace year end outstanding checks and deposits in transit to the cutoff bank statement B. Reconcile the bank account as of the end of the cutoff period C. Compare dates, payees and endorsements on returned checks with the cash disbursements record D. Determine that the year-end deposit in transit was credited by the bank on the first working day of the following accounting period.arrow_forward2. Which of the following control objectives would be least likely be considered by the internal auditors in drafting the audit procedures for bank accounts and banking arrangement activities under the Acquire-to-Retire process? Group of answer choices To ensure that fund transfers and automated methods of effecting banking transactions are valid and verified, in the best interests of the organization, and authorized. To ensure that banking arrangements and facilities are sufficient, appropriate and adequate for the business. To ensure that the potential for staff malpractice and fraud are minimized. To ensure that all banking transactions are bona fide, accurate and authorized whenever necessary. To ensure that all income from bank is recorded without delay. To ensure that overdraft set facilities are authorized and correctly operated within the limits defined by management and the organization's bankers. To ensure that banking charges are effectively monitored and…arrow_forward
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