Question 1

In the auditing of investments, the key issues are to ensure that the investments exist, are
owned, are properly recorded (including profits or losses on any sales) and disclosed, and
are properly valued at the end of the reporting period.

Accepted Answer

This statement is true as it outlines the main objectives of auditing investments. The auditor needs to ensure that the investments actually exist, are owned by the entity, are properly recorded in the financial statements, and are valued correctly at the end of the reporting period. This helps to provide assurance to the users of financial statements that the investments are being presented fairly and accurately.

Question 2

Which of these statements is the most correct? In the bank reconciliation,

Accepted Answer

C

Question 3

An imprest petty cash fund is a cash fund maintained at a constant level via
replenishment with the value of receipts paid out of the fund.

Accepted Answer

An imprest petty cash fund is a fixed amount of cash that is replenished when it reaches a certain low balance, and the replenishment amount is based on the amount of receipts paid out from the fund.

Question 4

Often the purchase and sale of investments are processed separately from other
purchases and sales, especially for entities holding substantial investment portfolios where
specific control procedures over investments are likely implemented.

Accepted Answer

This statement is true. Many entities, especially those with significant investment portfolios, have internal control procedures in place for the purchase and sale of investments that may be separate from other purchases and sales.

Question 5

Auditors usually vouch purchases and sales of investments by examining brokers'
advices and evidence of appropriate approval. Purchases and sales of non-current
investments, for example, should be vouched to authorizations in the minutes of directors'
meetings.

Accepted Answer

This statement accurately describes the auditing procedure for vouching purchases and sales of investments.

Question 6

For many entities, cash balances represent a large proportion of assets. However, the
amount of cash flowing through the accounts over a period of time is usually smaller than for
any other account in the financial statements.

Accepted Answer

Cash accounts often see a high volume of transactions, making the amount of cash flowing through these accounts over a period of time larger, not smaller, compared to many other accounts in the financial statements.

Question 7

In the auditing of cash and investments, the key issues are to ensure that the cash exists
and is owned by the client and that all cash transactions at the end of the reporting period
are complete and properly disclosed.

Accepted Answer

This statement accurately reflects the key issues in auditing cash and investments. The auditor must confirm the existence and ownership of cash, as well as ensure that all transactions are properly disclosed in the financial statements.

Question 8

The account balance audit objective, "Year-end transfers of cash between banks are recorded in the proper period", is derived from the

Accepted Answer

The audit objective of "year-end transfers of cash between banks are recorded in the proper period" relates to the cut-off assertion, as it pertains to the timing of the transactions being recorded in the appropriate accounting period.

Question 9

Where substantial investments are held, a separate investment subsidiary ledger or
investment register may be maintained. This records details of acquisitions and disposals,
the receipt of interest and dividends, and market values.

Accepted Answer

The statement is true.

Question 10

To verify the amounts included in the consolidated financial statements, the auditor must
obtain and verify the financial statements of each group entity. Where the auditor is not also
the auditor of another group entity, consideration must be given to the extent of
reliance that may be placed on the work of the other auditor.

Accepted Answer

This statement is true as it is a standard procedure for auditors to obtain and verify financial statements of all group entities to ensure the accuracy of consolidated financial statements. If the auditor is not also the auditor of another group entity, they may rely on the work of the other auditor to some extent, but the level of reliance must be evaluated based on the other auditor's competence and independence.

Question 11

When a company (or other entity) controls another company (or other entity),
Under IFRS, consolidated financial statements must be prepared for the economic entity.

Accepted Answer

According to IFRS, when one company (or other entity) controls another company (or other entity), the consolidated financial statements must be prepared for the economic entity.

Question 12

The significance of cash to the entity's liquidity and the fact that the balance is relatively
small mean that the acceptable level of detection risk in verifying cash balances is invariably
set as low.

Accepted Answer

The statement is true. Since cash is an important component of an entity's liquidity, detection risk in verifying cash balances is typically set to a low level. This is because any material misstatement in cash could have a significant impact on the entity's financial position and performance. Additionally, cash balances are relatively small compared to other account balances, making it easier to detect any errors or fraud in the account.

Question 13

Investment transactions rarely present cut-off problems, so the auditor may perform
many substantive procedures before or after the end of the reporting period. Income
statement account balances relating to investments are usually verified at the same time.

Accepted Answer

Investment transactions are typically settled in a timely manner, so cut-off problems are rare. Therefore, substantive procedures can be performed both before and after the end of the reporting period. Additionally, income statement accounts related to investments can be verified at the same time.

Question 14

Which of following assertions is a key concern for cash?

Accepted Answer

The key concerns for cash are ensuring its existence and completeness. Existence ensures that the cash reported on the financial statements actually exists, and completeness ensures that all cash transactions have been recorded. Classification, presentation, and rights and obligations are also important considerations for cash, but they are not the key concerns.

Question 15

Entities commonly invest in other entities, and these investments take a variety of forms
including equity securities such as preference or ordinary shares, or debt securities such as
corporate debentures or government bonds.

Accepted Answer

This statement is true. Entities can invest in other entities through various forms, including equity and debt securities.

Question 16

Ensuring that investment transactions are recorded in the correct accounts is an
example of testing the accuracy audit objective.

Accepted Answer

The answer of Ensuring that investment transactions are recorded in...

Question 17

Cash balances do not normally show a stable or predictable relationship with other current
or historical financial or operating data. As a result, the auditor will often not perform any
analytical review procedures in this part of the audit.

Accepted Answer

Cash balances can fluctuate significantly due to various factors, making it difficult to establish a stable or predictable pattern for analytical review procedures.

Question 18

Cash should be correctly identified and classified in the balance sheet. The classification that is correct is:

Accepted Answer

Cash on deposit is typically classified as a current asset, as it is expected to be used within the next year. Fixed-term deposits may be classified as either current or non-current assets depending on the maturity date of the deposit. If the deposit will mature within the next year, it is classified as a current asset. If the deposit will mature after more than one year, it is classified as a non-current asset.

Question 19

The balance of petty cash is generally material and for this reason the majority of audits
involve a significant audit of petty cash.

Accepted Answer

Petty cash typically involves a small amount of money, and its balance is generally immaterial to the overall financial statements, so audits do not usually focus significantly on petty cash.

Question 20

Lapping is an irregularity that results in the deliberate misappropriation of cash receipts,
either temporarily or permanently, for the personal use of the individual perpetrating the
unauthorized act.

Accepted Answer

Lapping involves the misappropriation of cash receipts for personal use.

Quiz 12: Auditing Cash and Investments

In the auditing of investments, the key issues are to ensure that the investments exist, are owned, are properly recorded (including profits or losses on any sales) and disclosed, and are properly valued at the end of the reporting period.

Which of these statements is the most correct? In the bank reconciliation,

An imprest petty cash fund is a cash fund maintained at a constant level via replenishment with the value of receipts paid out of the fund.

Often the purchase and sale of investments are processed separately from other purchases and sales, especially for entities holding substantial investment portfolios where specific control procedures over investments are likely implemented.

Auditors usually vouch purchases and sales of investments by examining brokers' advices and evidence of appropriate approval. Purchases and sales of non-current investments, for example, should be vouched to authorizations in the minutes of directors' meetings.

For many entities, cash balances represent a large proportion of assets. However, the amount of cash flowing through the accounts over a period of time is usually smaller than for any other account in the financial statements.

In the auditing of cash and investments, the key issues are to ensure that the cash exists and is owned by the client and that all cash transactions at the end of the reporting period are complete and properly disclosed.

The account balance audit objective, "Year-end transfers of cash between banks are recorded in the proper period", is derived from the

Where substantial investments are held, a separate investment subsidiary ledger or investment register may be maintained. This records details of acquisitions and disposals, the receipt of interest and dividends, and market values.

When a company (or other entity) controls another company (or other entity), Under IFRS, consolidated financial statements must be prepared for the economic entity.

The significance of cash to the entity's liquidity and the fact that the balance is relatively small mean that the acceptable level of detection risk in verifying cash balances is invariably set as low.

Investment transactions rarely present cut-off problems, so the auditor may perform many substantive procedures before or after the end of the reporting period. Income statement account balances relating to investments are usually verified at the same time.

Which of following assertions is a key concern for cash?

Entities commonly invest in other entities, and these investments take a variety of forms including equity securities such as preference or ordinary shares, or debt securities such as corporate debentures or government bonds.

Ensuring that investment transactions are recorded in the correct accounts is an example of testing the accuracy audit objective.

Cash balances do not normally show a stable or predictable relationship with other current or historical financial or operating data. As a result, the auditor will often not perform any analytical review procedures in this part of the audit.

Cash should be correctly identified and classified in the balance sheet. The classification that is correct is:

The balance of petty cash is generally material and for this reason the majority of audits involve a significant audit of petty cash.

Lapping is an irregularity that results in the deliberate misappropriation of cash receipts, either temporarily or permanently, for the personal use of the individual perpetrating the unauthorized act.