General Cash Acct
The general cash account will not be audited if the ending balance is immaterial.
True or False
False
The transfer of money from one bank account to another and improperly recording the transfer so that the amount is recorded as an asset in both banks is referred to as ________?
Kiting
The majority of financial instruments are valued using __________?
fair value estimates
Existing financial instruments are recorded.
Completeness
Who was the secondary auditor for Parmalat?
Grant Thornton
Which of the following would normally be discovered as part of the audit of the bank reconciliation?
a) Failure to bill a customer
b) Failure to include a deposit in transit on the bank reconciliation
c) Duplicate payment of a vendor`s invoice
d) Payment to an employee for more hours than he/she worked
b) Failure to include a deposit in transit on the reconciliation
Which of the following internal control procedures would most likely deter lapping of collections from customers?
a) Independent internal verification of dates of entry in the cash receipts journal with dates of daily cash summaries.
b) Authorization of write-offs of uncollectible accounts by a supervisor independent of credit approval
c) Segregation of duties between receiving cash and posting the accounts receivable ledger.
d) Supervisory comparison of the daily cash summary with the sum of the cash receipts journal entries.
c) Segregation of duties between receiving cash and posting the accounts receivable ledger
Business risks associated with the financial instruments are the same for all companies.
True or False
False
Financial instrument transactions are recorded in the proper period.
Cutoff
How much were assets overstated in the Balance Sheet?
16 Billion
Immediately upon receipt of cash, a responsible employee should
a) Record the amount in the cash receipts journal
b) Prepare a remittance listing.
c) Update the subsidiary accounts receivable records.
d) Prepare a deposit slip in triplicate.
b) Prepare a remittance listing.
Because cash is the most desirable asset for people to steal, it has a higher_______risk.
a: control
b: inherent
c: detection
d: liquidity
b: Inherent
Securities and contracts will typically be held by __________?
broker-dealer
Review minutes of board meetings to determine whether any securities are pledged as collateral.
Rights
How much was the falsified bank confirmation for?
5 Billion
List three of the major types of cash accounts maintained by business entities.
General cash account
Branch bank accounts
Imprest petty cash fund
Cash equivalents
List the procedures for uncovering fraud that directly related to year-end cash balance
Extended tests of the bank reconciliation
Proofs of cash
Tests of interbank transfer
What are the characteristic that differentiate the three levels of financial instrument measurement?
Level 1: Priced by the market
Level 2: Uses observable market inputs
Level 3: Uses a financial model and assumptions
Tracing outstanding checks to subsequent period bank statements.
Cutoff
What was the name of the shell company used to house false assets?
Buconero
List at least three misstatements that are designed to be detected by a bank reconciliation
1. Failure to include a check that has not cleared the bank on the outstanding checklist, even though it has been recorded on the cash disbursement journal
2. Cash received by the client subsequent to the balance sheet date, but recorded as cash receipts in the current year
3. Deposits recorded as cash receipts near the end of the year, deposited in the bank in the same month, and included in the bank reconciliation as a deposit in transit
4. Payments on notes payable debited directly to the bank balance by the bank but not entered in the client's records
A four-column audit schedule prepared by the auditor to reconcile the bank`s record of the client`s beginning balance, cash deposits, cleared checks, and ending balance for the period with the client`s record. What is this procedure called?
Proof of Cash
What four factors impact the inherent risk when auditing financial instruments?
The most important balance-related audit objective in the audit of cash.
Existence, accuracy, completeness.
In what year was the Parmalat fraud discovered?
2003