Question 1

Match the segregation of duties for investments with the misstatement (due to error or fraud)it can help prevent. 
-The maintenance of the securities ledger is separate from that of the general ledger

Accepted Answer

Separating the maintenance of the securities ledger from that of the general ledger helps prevent an individual from concealing defalcation (misappropriation of funds) that would normally be detected by reconciliation of subsidiary records with general ledger control accounts. This segregation ensures that no single individual has control over both recording and reconciliation processes, making it harder to conceal unauthorized transactions.

Question 2

Match the segregation of duties for investments with the misstatement (due to error or fraud)it can help prevent. 
-Custody of the securities is separate from accounting for the securities

Accepted Answer

By separating custody from accounting, it makes it more difficult for an individual to conceal a theft of securities, as multiple people would be involved in the process.

Answer: A 
 Separating custody from accounting can help prevent an individual from improperly recording securities values or not reporting the values to management, as multiple people would be involved in the process.

Answer: C 
 Separating custody from accounting can help prevent an individual from concealing any defalcation that would normally be detected by reconciliation of subsidiary records with general ledger control accounts, as multiple people would be involved in the process.

Answer: D 
 Separating custody from accounting would not necessarily prevent an individual from making fictitious transactions, as they can still manipulate the accounting records. Other controls, such as authorization and approval, would be necessary to prevent fictitious transactions.

Question 3

Match the type of bank account with its definition: 
-This account contains a stipulated amount of cash and is used for limited purposes

Accepted Answer

An imprest cash account contains a stipulated amount of cash and is used for limited purposes.

Question 4

Match the segregation of duties for investments with the misstatement (due to error or fraud)it can help prevent. 
-The valuation-monitoring function is separate from the acquisition function

Accepted Answer

Separating the valuation-monitoring function from the acquisition function helps ensure that the person who acquires the securities is not the same person who values them. This reduces the risk of improperly recording securities values or not reporting the correct values to management, as it would require collusion between two individuals to perpetrate such a fraud or error.

Question 5

What are the factors that must be considered to determine if a permanent decline in the value of an investment security has occurred?

Accepted Answer

The answer of What are the factors that must be...

Question 6

Match the type of bank account with its definition: 
-This account is typically immaterial in amount and is used for paying certain types of expenses and transactions

Accepted Answer

Petty cash accounts are used for small, daily expenses and transactions. Examples can include office supplies, postage, or small purchases. These accounts are typically small in amount and are kept on hand to pay for these sorts of expenses as they arise.

Question 7

Match the segregation of duties for investments with the misstatement (due to error or fraud)it can help prevent. 
-The initiation function is separate from the final approval function

Accepted Answer

Separating the initiation function from the final approval function helps prevent an individual from making fictitious transactions, as it requires multiple parties to be involved in the process, reducing the risk of unauthorized or fraudulent activities.

Question 8

Match the type of bank account with its definition: 
-This account is the principal cash account of an entity

Accepted Answer

The general cash account is the primary cash account used by an entity to handle all of their cash transactions.

Question 9

Match the type of bank account with its definition: 
-This account is a separate cash account maintained at the local bank of the entity

Accepted Answer

A branch account is a separate cash account maintained at the local bank of the entity, specifically for transactions related to a particular branch.

Quiz 16: Auditing the Financinginvesting Process: Cash and Investments

Match the segregation of duties for investments with the misstatement (due to error or fraud) it can help prevent. -The maintenance of the securities ledger is separate from that of the general ledger

Match the segregation of duties for investments with the misstatement (due to error or fraud) it can help prevent. -Custody of the securities is separate from accounting for the securities

Match the type of bank account with its definition: -This account contains a stipulated amount of cash and is used for limited purposes

Match the segregation of duties for investments with the misstatement (due to error or fraud) it can help prevent. -The valuation-monitoring function is separate from the acquisition function

What are the factors that must be considered to determine if a permanent decline in the value of an investment security has occurred?

Match the type of bank account with its definition: -This account is typically immaterial in amount and is used for paying certain types of expenses and transactions

Match the segregation of duties for investments with the misstatement (due to error or fraud) it can help prevent. -The initiation function is separate from the final approval function

Match the type of bank account with its definition: -This account is the principal cash account of an entity

Match the type of bank account with its definition: -This account is a separate cash account maintained at the local bank of the entity