Principles of Auditing & Other Assurance Services Ray Whittington 21st Edition- Test Bank

Principles of Auditing & Other Assurance Services Ray Whittington 21st Edition- Test Bank

Principles of Auditing & Other Assurance Services, 21e (Whittington)
Chapter 10 Cash and Financial Investments

1) The auditors should count small petty cash funds at year-end to make sure that balance is not overstated on the financial statements.

2) Control over the receipt of cash sales is best achieved when two or more employees participate in each transaction.

3) Mailroom personnel of a company should prepare a control listing of incoming cash receipts and deposit them intact daily.

4) Signed checks should be returned to the cash disbursements clerk for mailing.

5) Lapping of accounts receivable by an employee is can occur when there is adequate segregation of duties with respect to cash disbursements.

6) Confirmations for cash balances should be mailed only to the financial institutions with which the client has a cash balance at year-end.

7) A proof of cash is an audit procedure that is performed on almost every engagement.

8) A compensating balance agreement always requires that cash be reclassified as a noncurrent asset.

9) Verification of cash and other liquid assets on the same date may prevent substitution of one form of asset for another.

10) For investments in securities accounted for by the equity method, the auditors are primarily concerned with verifying the fair value of the investments.