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Auditing > Employee Fraud/Cash Audit > Flashcards

Employee Fraud/Cash Audit Flashcards

1
Q

Understanding the client, its environment, and inherent risks is the (blank) step in the audit of cash

A

first

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2
Q

Obtaining an understanding of internal control over cash is the (blank) step in the audit of cash

A

second

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3
Q

Assessing the risk of material misstatement and designing further audit procedures/test of controls is the (blank) step in the audit of cash

A

third

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4
Q

Performing further audit procedures (tests of controls) is the (blank) step in the audit of cash

A

fourth

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5
Q

Performing further audit procedures, substantive procedures for cash transactions and balances, is the (blank) step in the audit of cash

A

fifth

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6
Q

Client’s bank reconciliations can be tested via

A

reperformance

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7
Q

To ensure transactions are processed in the correct period, it is important to verify (blank) for cash receipts and cash disbursements

A

cutoff

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8
Q

Confirmations need to be mailed under the control of the

A

auditor

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9
Q

Auditors are often concerned with the (blank) of cash, as this is where most misstatements occur

A

overstatement

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10
Q

cutoff bank statements are used to receive information of bank activity (blank) the period being audited.

A

after

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11
Q

Substantive procedure of obtaining analyses of cash balances and reconciling them to the GL tests which two assertions

A

Existence and accuracy

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12
Q

Substantive procedures of counting cash on hand and confirming balances with financial institutions test which 5 assertions

A

Existence, occurrence, accuracy, cutoff, and rights

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13
Q

Substantive procedures of verifying client’s cutoff of cash transactions and analyzing bank transfer occurring at year end test which 5 assertions

A

cutoff, existence, occurrence, rights, completeness

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14
Q

Substantive procedure of investigating payments to related parties tests which assertion

A

presentation and disclosure

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15
Q

In cash analyses, once auditors have performed procedures on confirmations and reconciliations, it is important to

A

reconcile the balance to the GL

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16
Q

The auditor needs to (blank) cutoff to ensure proper classification

A

verify

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17
Q

(Blank) involves misstatement using transfers between accounts

A

Kiting

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18
Q

Analyzing bank transfers at the end of the period being audited and the beginning of the next period helps detect

A

kiting

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19
Q

What is an appropriate audit program step for the review of canceled checks to ensure that only authorized check signers are actually signing checks?

A

Examine a representative sample of signed checks and determine that the signatures are authorized in the corporate signature book.

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20
Q

The cash account is involved in which cycles?

A

Revenue and collection, acquisition and expenditure, AND production and conversion

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21
Q

When a fraud perpetrator embezzles company funds for the purpose of buying gifts for co-workers, the fraudster’s motive is said to be:

A

Economic

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22
Q

An enlightened management team can decrease the probability of fraud in the company best by:

A

Establishing work teams that share responsibilities, performance, and bonuses based on collective efforts.

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23
Q

When confirming cash through a bank electronically with Confirmation, what must the auditor, client, and bank do to make it possible?

A

Register with Confirmation for the electric confirmation

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24
Q

In an internal audit report the auditor must communicate the audit findings to management. To effectively communicate audit findings, the internal auditor must include in the report:

A

Condition that was identified, criteria that renders the condition inappropriate, the cause of the condition

25
Q

For each relevant assertion identified by the auditor, professional standards require auditors to first gain an understanding of the (blank blank) that have been designed to mitigate the risk of material misstatement

A

internal controls

26
Q

Detection risk is set based on the level of (blank blank) and risk of material misstatement

A

audit risk

27
Q

A method to discover unrecorded transactions is a four-column bank reconciliation which is called

A

proof of cash

28
Q

The auditor selects examples of a transaction and traces them from initial receipt to the recording in the accounting records when performing a(n)

A

walkthrough

29
Q

the primary document used to test the cash balance in the F/S, also provides an opportunity for management to monitor separation of duties for cash receipts/disbursements

A

Bank reconciliation

30
Q

When a material misstatement is not prevented or detected by the client’s internal controls or auditors’ substantive procedures, (blank) has been manifested

A

audit risk

31
Q

In many situations an employee initially receives cash and thus has custody. Because this cannot be avoided, good control dictates that (these two things)

A
  1. remittance advices should be sent to the controller’s office for recording
  2. cash should be deposited daily and intact
32
Q

Substantive procedures over cash are (always/sometimes/ never) performed, regardless of risk.

A

always

33
Q

Tests of controls over cash often support a (blank) in control risk.

A

reduction

34
Q

Employees are provided an opportunity to furnish information about possible misdeeds when (blank blank) questioning is used.

A

fraud audit

35
Q

Specific applications of the attribute and performance standards to specific types of engagements are addressed in the IIA (blank) standards

A

implementation

36
Q

Yellow Book standards are used to guide the audits of which agencies

A

state, federal, and local gov’t agencies and units

37
Q

Conducting internal audit activities, as well as a measure of quality is found in the IIA (blank) standards

A

performance

38
Q

the 5 basic activities in the revenue and collection cycle

A
  1. receiving and processing orders (incl. credit granting).
  2. delivering goods/services to customers
  3. billing customers and accounting for A/R
  4. collecting and depositing cash received
  5. reconciling bank stmts
39
Q

the cash receipts journal contains detailed entries for all receipts by entity, that should be recorded to which two accounts:

A

debit - cash
credit - A/R

40
Q

Entries in the cash receipt or disbursement journal that may signal errors or manipulations are

A

adjusting and correcting entries from the bank reconciliation

41
Q

the cash disbursement journal entries are usually inspected for what suspect entries

A

checks made out to cash or bearer, electronic payments to unauthorized vendors

42
Q

A timely preparation of the (blank blank) is an important element of a company’s internal control over cash

A

bank reconciliation

43
Q

Internal controls such as dual signatures for large expenditures can be verified via review of

A

cancelled checks

44
Q

the risk that auditors will issue an unmodified opinion on F/S that contain a material misstatement is

A

audit risk

45
Q

what are the three primary relevant assertions of the cash account

A

existence
valuation
presentation and disclosure

46
Q

what could go wrong regarding the cash account and existence assertion?

A

cash balance may not exist in the company’s bank account

47
Q

what could go wrong regarding the cash account and valuation assertion?

A

cash balance held in foreign country not translated properly

48
Q

what could go wrong regarding the cash account and presentation and disclosure assertion?

A

restrictions on cash balance not properly disclosed

49
Q

when evaluating the design of internal controls related to cash, an auditor must also consider

A

whether controls have been designed to mitigate employee fraud

50
Q

Tracing reconciling items to appropriate supporting documentation tests this assertion and internal control

A

existence, the CFO regularly reviews bank reconciliations

51
Q

inspecting the monthly cash translation adjustment calculation for evidence tests this assertion and internal control

A

valuation, the treasurer reviews the cash translation adjustment calculation and independently checks spot rates

52
Q

reperforming the work completed by the corporate secretary to ensure cash restrictions have been disclosed tests this assertion and internal control

A

presentation and disclosure, corporate secretary reviews cash footnote disclosures regularly

53
Q

if controls are not in place or personnel are not performing their control activities effectively, auditors must (blank blank blank) to detect whether control failures have produced material misstatements in F/S

A

design substantive procedures

54
Q

what are the two phases of control risk assessment

A
  1. obtain understanding of company’s controls
  2. obtain evidence from actual tests of controls
55
Q

who should prepare the bank account reconciliations

A

employee outside normal cash operations (recording and custody)

56
Q

what are two ways an auditor can obtain understanding of cash controls

A

internal control questionnaire or walkthrough

57
Q

what tests can be performed for the internal controls over cash deposits

A

observe opening of the mail: 1. ensure two employees open the mail, remittance advice is received, checks are endorsed
2. compare listing of checks to total deposit ticket and # of checks
3. ensure total amount on bank stmt was recorded in proper period

58
Q

what test of control can be performed to ensure deposits are reconciled and posted to A/R

A

sample daily postings to A/R sub ledger, trace the amount to the amount of cash sub ledger

59
Q

Name 5 categories of key controls over cash receipts/disbursements

A
  1. Information Processing (voucher packet, bank reconciliation, deposits reconciled to A/R)
  2. physical controls over security of assets
  3. segregation of duties
  4. performance reviews
  5. reconciliations

Auditing (10 decks)

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