Question 9

Which of these is a substantive test of details of balances used for cash balances?

	a.	verifying the bank reconciliation
	b.	obtaining and using the subsequent periods bank statement
	c.	confirming bank balances
	d.	all of the above

Question 10

During the observation of the inventory count, the auditor has no responsibility to:

	a.	watch for damaged and obsolete inventory items.
	b.	make some test counts of inventory quantities.
	c.	supervise the taking of the inventory.
	d.	the auditor has responsibility for all of the above

Question 11

The timing of a physical count of inventory is negotiated between the auditor and management. If the assessed level of control risk is high, an auditor would probably:

	a.	apply gross profit tests to ascertain the reasonableness of the physical counts.
	b.	request the entity to schedule the physical count at the end of the year.
	c.	increase the extent of tests of control of the inventory cycle.
	d.	insist that the entity performs physical counts of inventory several times during the year.

Question 12

Which of these procedures do auditors usually perform as a test of details of transactions to verify all management assertions relating to investments?

	a.	trace purchases of investments to brokers advices
	b.	vouch purchases and sales of investments to brokers advices
	c.	inspect the minutes of directors meetings
	d.	both b and c

Question 13

Which of these statements is the most correct?

	a.	A high volume of transactions flowing through an entitys cash account contributes to a significant level of risk particularly for the rights and obligations assertion.
	b.	A high volume of transactions flowing through an entitys cash account contributes to a significant level of inherent risk for cash balance assertions.
	c.	A high volume of transactions flowing through an entitys cash account contributes to a significant level of detection risk for cash balance assertions.
	d.	A high volume of transactions flowing through an entitys cash account contributes to a significant level of risk particularly for the disclosure assertion.

Question 14

The statement that is not true concerning the confirmation of securities held by outsiders for safe keeping is:

	a.	the auditor should receive responses directly from the custodian.
	b.	either positive or negative confirmations can be used.
	c.	the data confirmed are the same as the data that should be noted when the auditor is able to inspect the securities.
	d.	confirmations should be requested as of the date other securities are counted. Question 15

Which of the following would not normally be done by the auditor in connection with the subsequent periods bank statement?

a.

use a bank statement for a period ending at least 7 days after year-end

b.

trace deposits in transit on the bank reconciliation to deposits on the bank statement.

c.

scan the cut-off statement for unusual items

d.

all the above tasks would be done by the auditor in connection with the subsequent periods bank statement.

Question 16

One red flag that may indicate fraud in relation to cash register operations is:

	a.	increasing cash sales, relative to credit card sales.
	b.	multiple refunds or voids just under the review limit.
	c.	cashiers who cannot issue refunds without supervision.
	d.	unusually low inventory shrinkage.