TRANSACTION COMPS MODELLING WALL STREET PREP EXAM
NEWEST 2024 ACTUAL EXAM
Which of the following is the focus of an audit of cash for most companies?
a. General cash account.
b. Payroll cash account.
c. Petty cash account.
d. Money market account. - ANSWER: a. General cash account.
The test of details of balances procedure that requires the auditor to foot the
outstanding check list and deposits in transit is an attempt to satisfy which audit
objective?
a. Cutoff.
b. Presentation and disclosure.
c. Detail tie-in.
d. Completeness. - ANSWER: c. Detail tie-in.
Which of the following cycles does not affect cash in bank?
a. Capital acquisitions cycle.
b. Inventory and warehousing.
c. Payroll and personnel cycle.
d. Acquisitions and disbursements. - ANSWER: b. Inventory and warehousing.
The audit objective of determining that cash in bank, as stated on the reconciliation,
foots correctly and agrees with the general ledger can be tested by which of the
following procedures?
a. Performing tests for kiting.
b. Receiving and testing a cutoff bank statement.
c. Footing the outstanding checks list and the list of deposits in transit.
d. Examining the minutes of the board of directors for restrictions on the use of cash.
- ANSWER: c. Footing the outstanding checks list and the list of deposits in transit.
Which of the following statements is correct?
a. Auditors must obtain bank confirmations on every audit.
b. Auditors obtain bank confirmations at their discretion.
c. Auditing standards do not address specific requirements regarding bank
confirmations.
d. Auditing standards do not require bank confirmations except when there are an
unusually large number of inactive bank accounts. - ANSWER: d. Auditing standards
do not require bank confirmations except when there are an unusually large number
of inactive bank accounts.
Which of the following statements is correct?
,a. Bank personnel are responsible for providing reasonable assurance that a
response to a bank confirmation is accurate.
b. Bank personnel are responsible for providing complete assurance that a bank
confirmation is complete.
c. Bank personnel are not responsible for searching their records for bank balances
or loans beyond those included on the bank confirmation.
d. Bank personnel are not responsible for providing information related to interest
on the bank confirmation. - ANSWER: c. Bank personnel are not responsible for
searching their records for bank balances or loans beyond those included on the
bank confirmation.
The general cash account is considered significant in almost all audits:
a. where the ending balance is material.
b. even when the ending balance is immaterial.
c. except those of not-for-profit organizations.
d. where either the beginning or ending balance is material. - ANSWER: b. even when
the ending balance is immaterial.
Which of the following errors would be least likely to be discovered during the audit
of the acquisitions and payments cycle?
a. Duplicate payment of a vendor's invoice.
b. Improper payments of officers' personal expenditures.
c. Payment of interest to a related party for an amount in excess of the going rate.
d. Payment for raw materials that were not received. - ANSWER: c. Payment of
interest to a related party for an amount in excess of the going rate.
Testing the reasonableness of the cash balance at year-end is less important when
the year-end bank reconciliation is verified:
a. on a 100% basis.
b. by someone in client's organization who is independent of the treasurer's
function.
c. by someone in client's organization who is independent of the controller's
function.
d. by the owner/manager. - ANSWER: a. on a 100% basis.
The starting point for the verification of the balance in the general bank 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 and reconcile it. - ANSWER: a. a bank
reconciliation from the client.
In an effort to satisfy the completeness objective, the auditor could perform which of
the following test of details of balance procedures?
a. Trace the book balance on the reconciliation to the general ledger.
b. Trace outstanding checks to subsequent period bank statements.
,c. Perform a four-column proof of cash.
d. Review financial statements to make sure that material savings accounts and
certificates of deposit are disclosed separately. - ANSWER: c. Perform a four-column
proof of cash.
The audit procedure which requires the auditor to record the last check number
used on the last day of the year and subsequently trace to the outstanding checks
and the cash disbursements records is performed to satisfy the audit objective of:
a. detail tie-in.
b. existence.
c. completeness.
d. cutoff. - ANSWER: d. cutoff.
The direct receipt of a confirmation from every bank with which the client does
business is:
a. required by auditing standards for every audit.
b. not necessary unless material fraud is suspected.
c. typically done but not required by auditing standards.
d. necessary for every audit except when there are an unusually large number of
active accounts. - ANSWER: c. typically done but not required by auditing standards.
The reason for testing the client's bank reconciliation is to verify whether the client's
recorded bank balance is the same amount as the actual cash in bank, except for
deposits in transit, checks outstanding, and other reconciling items. The information
needed to complete the tests of the reconciliation are provided by the:
a. client's records and ledgers for the year under audit.
b. cutoff bank statement.
c. client's records and ledgers for the subsequent year.
d. canceled checks for the year under audit. - ANSWER: b. cutoff bank statement.
Which of the following items would not normally appear on bank reconciliations?
a. Balance per bank
b. List of deposits in transit
c. Outstanding deposits
d. Outstanding checks - ANSWER: c. Outstanding deposits
A proof of cash is effective at identifying which of the following misstatements?
a. Checks written for incorrect amounts.
b. Checks issued to invalid vendors.
c. Fraudulent checks.
d. Checks recorded by the books for an amount different than the check. - ANSWER:
d. Checks recorded by the books for an amount different than the check.
If a bank does not respond to a bank confirmation request, an auditor may:
Perform alternative procedures Send a second request Ask the client to
communicate with the bank to ask them to complete and return the confirmation
a. NO YES YES
, b. NO NO YES
c. YES NO YES
d. YES YES NO - ANSWER: a. NO YES YES
Which of the following cash transfers results in a misstatement of cash at December
31, 2007?
Bank Transfer Schedule
Recorded transfer in books Disbursement paid by bank Recorded transfer in books
Date received by bank
a. 12/31/07 1/04/08 12/31/07 12/31/07
b. 1/04/08 1/05/08 12/31/07 1/04/08
c. 12/31/07 1/05/08 12/31/07 1/04/08
d. 1/04/08 1/11/08 1/04/08 1/04/08 - ANSWER: b. 1/04/08 1/05/08 12/31/07
1/04/08
_____ is cash stolen from an organization before it is recorded in the accounting
records.
a. Theft
b. Cash larceny
c. Skimming
d. Floating - ANSWER: c. Skimming
During his examination of a January 19, 2008 cutoff bank statement, an auditor
noticed that the majority of checks listed as outstanding at December 31, 2007, had
not cleared the bank. This would indicate:
a. a high probability of kiting.
b. a high probability of lapping.
c. that the 2007 cash disbursements records had been closed prior to December 31,
2007.
d. that the 2007 cash disbursements records had been held open past December 31,
2007. - ANSWER: d. that the 2007 cash disbursements records had been held open
past December 31, 2007.
The following information applies to the questions below:
Listed below are four interbank cash transfers, indicated by the numbers 1, 2, 3, and
4, of a client for late December 2007 and early January 2008:
Bank Account One Bank Account Two
Disbursement Date (Month/Day) Receiving Date (Month/Day)
Per Bank Per Book Per Bank Per Book
a. 12/31 12/30 12/31 12/30
b. 1/2 12/30 12/31 12/31
c. 1/3 12/31 1/2 1/2
d. 1/3 12/31 1/2 12/31 - ANSWER:
Based on the schedule of interbank transfers above, which of the cash transfers
indicates an error in cash cutoff at December 31, 2007?
a. 1
NEWEST 2024 ACTUAL EXAM
Which of the following is the focus of an audit of cash for most companies?
a. General cash account.
b. Payroll cash account.
c. Petty cash account.
d. Money market account. - ANSWER: a. General cash account.
The test of details of balances procedure that requires the auditor to foot the
outstanding check list and deposits in transit is an attempt to satisfy which audit
objective?
a. Cutoff.
b. Presentation and disclosure.
c. Detail tie-in.
d. Completeness. - ANSWER: c. Detail tie-in.
Which of the following cycles does not affect cash in bank?
a. Capital acquisitions cycle.
b. Inventory and warehousing.
c. Payroll and personnel cycle.
d. Acquisitions and disbursements. - ANSWER: b. Inventory and warehousing.
The audit objective of determining that cash in bank, as stated on the reconciliation,
foots correctly and agrees with the general ledger can be tested by which of the
following procedures?
a. Performing tests for kiting.
b. Receiving and testing a cutoff bank statement.
c. Footing the outstanding checks list and the list of deposits in transit.
d. Examining the minutes of the board of directors for restrictions on the use of cash.
- ANSWER: c. Footing the outstanding checks list and the list of deposits in transit.
Which of the following statements is correct?
a. Auditors must obtain bank confirmations on every audit.
b. Auditors obtain bank confirmations at their discretion.
c. Auditing standards do not address specific requirements regarding bank
confirmations.
d. Auditing standards do not require bank confirmations except when there are an
unusually large number of inactive bank accounts. - ANSWER: d. Auditing standards
do not require bank confirmations except when there are an unusually large number
of inactive bank accounts.
Which of the following statements is correct?
,a. Bank personnel are responsible for providing reasonable assurance that a
response to a bank confirmation is accurate.
b. Bank personnel are responsible for providing complete assurance that a bank
confirmation is complete.
c. Bank personnel are not responsible for searching their records for bank balances
or loans beyond those included on the bank confirmation.
d. Bank personnel are not responsible for providing information related to interest
on the bank confirmation. - ANSWER: c. Bank personnel are not responsible for
searching their records for bank balances or loans beyond those included on the
bank confirmation.
The general cash account is considered significant in almost all audits:
a. where the ending balance is material.
b. even when the ending balance is immaterial.
c. except those of not-for-profit organizations.
d. where either the beginning or ending balance is material. - ANSWER: b. even when
the ending balance is immaterial.
Which of the following errors would be least likely to be discovered during the audit
of the acquisitions and payments cycle?
a. Duplicate payment of a vendor's invoice.
b. Improper payments of officers' personal expenditures.
c. Payment of interest to a related party for an amount in excess of the going rate.
d. Payment for raw materials that were not received. - ANSWER: c. Payment of
interest to a related party for an amount in excess of the going rate.
Testing the reasonableness of the cash balance at year-end is less important when
the year-end bank reconciliation is verified:
a. on a 100% basis.
b. by someone in client's organization who is independent of the treasurer's
function.
c. by someone in client's organization who is independent of the controller's
function.
d. by the owner/manager. - ANSWER: a. on a 100% basis.
The starting point for the verification of the balance in the general bank 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 and reconcile it. - ANSWER: a. a bank
reconciliation from the client.
In an effort to satisfy the completeness objective, the auditor could perform which of
the following test of details of balance procedures?
a. Trace the book balance on the reconciliation to the general ledger.
b. Trace outstanding checks to subsequent period bank statements.
,c. Perform a four-column proof of cash.
d. Review financial statements to make sure that material savings accounts and
certificates of deposit are disclosed separately. - ANSWER: c. Perform a four-column
proof of cash.
The audit procedure which requires the auditor to record the last check number
used on the last day of the year and subsequently trace to the outstanding checks
and the cash disbursements records is performed to satisfy the audit objective of:
a. detail tie-in.
b. existence.
c. completeness.
d. cutoff. - ANSWER: d. cutoff.
The direct receipt of a confirmation from every bank with which the client does
business is:
a. required by auditing standards for every audit.
b. not necessary unless material fraud is suspected.
c. typically done but not required by auditing standards.
d. necessary for every audit except when there are an unusually large number of
active accounts. - ANSWER: c. typically done but not required by auditing standards.
The reason for testing the client's bank reconciliation is to verify whether the client's
recorded bank balance is the same amount as the actual cash in bank, except for
deposits in transit, checks outstanding, and other reconciling items. The information
needed to complete the tests of the reconciliation are provided by the:
a. client's records and ledgers for the year under audit.
b. cutoff bank statement.
c. client's records and ledgers for the subsequent year.
d. canceled checks for the year under audit. - ANSWER: b. cutoff bank statement.
Which of the following items would not normally appear on bank reconciliations?
a. Balance per bank
b. List of deposits in transit
c. Outstanding deposits
d. Outstanding checks - ANSWER: c. Outstanding deposits
A proof of cash is effective at identifying which of the following misstatements?
a. Checks written for incorrect amounts.
b. Checks issued to invalid vendors.
c. Fraudulent checks.
d. Checks recorded by the books for an amount different than the check. - ANSWER:
d. Checks recorded by the books for an amount different than the check.
If a bank does not respond to a bank confirmation request, an auditor may:
Perform alternative procedures Send a second request Ask the client to
communicate with the bank to ask them to complete and return the confirmation
a. NO YES YES
, b. NO NO YES
c. YES NO YES
d. YES YES NO - ANSWER: a. NO YES YES
Which of the following cash transfers results in a misstatement of cash at December
31, 2007?
Bank Transfer Schedule
Recorded transfer in books Disbursement paid by bank Recorded transfer in books
Date received by bank
a. 12/31/07 1/04/08 12/31/07 12/31/07
b. 1/04/08 1/05/08 12/31/07 1/04/08
c. 12/31/07 1/05/08 12/31/07 1/04/08
d. 1/04/08 1/11/08 1/04/08 1/04/08 - ANSWER: b. 1/04/08 1/05/08 12/31/07
1/04/08
_____ is cash stolen from an organization before it is recorded in the accounting
records.
a. Theft
b. Cash larceny
c. Skimming
d. Floating - ANSWER: c. Skimming
During his examination of a January 19, 2008 cutoff bank statement, an auditor
noticed that the majority of checks listed as outstanding at December 31, 2007, had
not cleared the bank. This would indicate:
a. a high probability of kiting.
b. a high probability of lapping.
c. that the 2007 cash disbursements records had been closed prior to December 31,
2007.
d. that the 2007 cash disbursements records had been held open past December 31,
2007. - ANSWER: d. that the 2007 cash disbursements records had been held open
past December 31, 2007.
The following information applies to the questions below:
Listed below are four interbank cash transfers, indicated by the numbers 1, 2, 3, and
4, of a client for late December 2007 and early January 2008:
Bank Account One Bank Account Two
Disbursement Date (Month/Day) Receiving Date (Month/Day)
Per Bank Per Book Per Bank Per Book
a. 12/31 12/30 12/31 12/30
b. 1/2 12/30 12/31 12/31
c. 1/3 12/31 1/2 1/2
d. 1/3 12/31 1/2 12/31 - ANSWER:
Based on the schedule of interbank transfers above, which of the cash transfers
indicates an error in cash cutoff at December 31, 2007?
a. 1
