Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ACCO 360 > Chapter 17 > Flashcards

Chapter 17 Flashcards

1
Q

Def: general cash account

A

the primary bank account for most organizations; almost all cash receipts and disbursement go through here

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

purpose of general cash account (2)

A
  1. make payments and record cash received from operations

2. small companies who only have one account have this one

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

def: imprest payroll account

A

bank account to which the exact amount of payroll for pay period is transferred from general cash account + sometimes a fixed balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

purpose of imprest payroll account

A
  1. used to pay employees and remittances to CRA

2. helps improve control over cash and reduce time to reconcile bank accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

def: branch bank account

A

separate bank account at a local bank ; could be either general or imprest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

purpose of branch bank account

A
  1. provides more rapid deposits and/or payments at the local level
  2. builds business relationships with local banks
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

def: imprest petty cash fund

A

a fund of cash maintained within the company for small cash payments and reimbursed periodically

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

purpose of imprest petty cash fund

A

small cash purchases that can be paid more conveniently and quickly by cash then cheque

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

def: cash equivalents

A

short term, highly liquid investments (such as term deposits) that have a known value and an insignificant risk of change

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

a liability also used as cash equivalents

A

bank overdrafts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

purpose of cash equivalents

A

used to manage fluctuating cash balances so that cash is available for short term operating needs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

how to verify petty cash?

A

test petty cash transactions rather than the ending balance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

important part of testing petty cash is

A

determining the client’s procedures for handling the funds

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

how to determine the clients procedures?

A

discuss internal control with the custodian and examine documentation of a few transactions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

two most common procedures to test petty cash

A

counting the petty cash balance and carrying out detailed tests of 1-2 reimbursement transactions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

when assessing inherent risk, the auditor should consider if the client has

A

cash flow problems in meeting its current obligations on a timely basis or any debt covenants or regulatory requirements

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

inherent risk for cash is

A

high because it is more susceptible to theft than other assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

the auditing of cash is

A

easy because there aren’t many estimates except for forex transactions

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

most important internal control for cash is

A

independent bank reconciliations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

internal controls over cash receipts and disbursements are key in assessing

A

control risk

21
Q

individuals who have incompatible functions granted to them using computer systems would results in

A

control risk being high

22
Q

two kinds of electronic payments

A

EDI and EFT

23
Q

EDI stands for

A

electronic data interchange

24
Q

EFT stands for

A

electronic fund transfer

25
Q

having EDI or EFT improves

A

internal controls since there is no cash handling by employees

26
Q

2 things to make sure the org has with EDI and EFT

A

only authorized amounts are set up for payment and all automatic withdrawals are recorded in the period made

27
Q

internal controls over the year end cash balances in the general account can be divided into 2

A
  1. controls over the transaction cycles affecting the recording of cash receipts and disbursements
  2. independent bank reconciliations
  3. having a responsible employee to review the monthly reconciliations asap
28
Q

def: standard bank confirmation form

A

a form approved by CPA Canada and the Canadian banker association through which the bank responds to the auditor’s request for information about the client’s bank balances, loan and other

29
Q

when to do extended tests of year end bank reconciliation?

A

when the auditor believes that the year end bank rec may be intentionally misstated

30
Q

purpose of extended procedures

A

verify whether all transactions included in the journals for the last month of the year were correctly included in or excluded from the bank rec and all items in it were correctly included

31
Q

when to prepare proof of cash

A

when the client has material internal control weaknesses in cash

32
Q

def: proof of cash

A

four column working paper used to reconcile the banks’ records of the client beg balance, cash deposits, cleared cheques and ending balance for the period

33
Q

the auditor uses a proof of cash to determine whether the following occurred (4)

A
  1. all recorded cash receipts were deposited
  2. all deposits in the bank were recorded in the accounting records
  3. all recorded cash disbursements were paid by the bank
  4. all amounts that were paid by the bank were recorded
34
Q

def: kiting

A

transferring money from one bank to another and improperly recording to the transaction

35
Q

what is the goal of kiting

A

overstating cash

36
Q

how to test for kiting?

A

auditors list all bank transfers made a few days before and after the balance sheet date and trace each to the accounting records for proper recording

37
Q

how does lapping occur?

A

same person that handles cash, record A/R and receives cash

38
Q

most cases of lapping can be prevented with good controls

A

segregation and rotation

39
Q

why do we need bank confirmations?

A
  1. reach out to the bank and ask how much money is in the bank
  2. bank sends out to auditor bypassing the client
  3. usually done electronically
40
Q

how many items should be tested when auditing a bank rec

A

ALL audit items except for the true balance

41
Q

how to test bank balance?

A

direct confirmation with teh bank

42
Q

how to test deposit in transit?

A

following month statement

cash receipts or disbursement

43
Q

how to test outstanding cheque?

A

journal, copy of deposit or cheque as back up

44
Q

how to test for bank error

A

current bank statement, copy of actual receipt

45
Q

how to test book balance?

A

compare with general ledger

46
Q

how to test interest earned?

A

current bank statement

47
Q

how to test NSF cheque?

A

current bank statement, copy cheque, note from bank

48
Q

how to test recording error

A

current banking statement, copy of cheque or deposit, journal entry

49
Q

receivables collected through banks

A

current bank statement, copy of payment and bank credit memo

ACCO 360 (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions