Exam 6: Employee Fraud and the Audit of Cash

A company employs three accounts payable clerks and one treasurer.Their responsibilities are as follows: Which of the following would indicate a weakness in the company's internal controls? Clerk 1 Reviews vendor invoices for proper signature approval. Clerk 2 Enters vendor invoices into the accounting system and verifies payment terms. Clerk 3 Posts entered vendor invoices to the accounts payable ledger for Payment and mails checks. Treasurer Reviews the vendor invoices and signs each check.

An auditor is considering whether the omission of the confirmation of investments impairs the auditor's ability to support a previously expressed unmodified opinion.The auditor need not perform this omitted procedure if

Which of the following situations most likely represents the highest risk of a misstatement arising from misappropriation of assets?

What kind of error or fraud could happen if the inventory warehouse manager also had responsibility for making the physical inventory count and reconciling discrepancies to the perpetual inventory records?

When auditing financial statements and finding indications of a possible misappropriation of assets,independent auditors should

After checks are signed for vendor invoices,why should vouchers be marked "paid" or otherwise mutilated?

Which of the following should be performed by the persons opening the mail and recording payments?

When counting cash on hand the auditor must exercise simultaneous control over all cash and other negotiable assets to prevent

Which of the following management policies would increase the probability of fraud in a company?

If the amount of a check is altered by an employee after it has cleared the bank,the change can be detected by

Which of the following is ordinarily considered an "extended procedure" during the independent audit of financial statements?

Each of the following is a type of known misstatement,except

As payments are received,one mailroom employee is assigned the responsibility of prelisting receipts and preparing the deposit slip prior to forwarding the receipts,deposit slip,and remittance advices to accounts receivable for posting.Accounts receivable personnel re-foot the deposit slip,stamp a restrictive endorsement on the back of each check,and then forward the receipts and deposit slip to the treasury department.Evaluate the internal control of the described process.Which of the following is a reasonable assessment of internal control in this process?

An auditor wishes to perform tests of controls on a client's cash disbursements procedures.If the control activities leave no audit trail of documentary evidence,the auditor most likely will test the activities by

List,and briefly describe,the three factors that increase the probability of fraud.

Narbona,CPA is reviewing controls over cash received through a bank night depository.Which controls would she find most important?

An auditor would least likely initiate a discussion with a client's audit committee concerning

In the audit of cash the auditor obtains a bank cutoff statement primarily to

An auditor has identified the controller's review of the bank reconciliation as a control to test.In connection with this test,the auditor interviews the controller to understand the specific data reviewed on the reconciliation.In addition,the auditor verifies that the bank reconciliation is properly prepared by the accountant and reviewed by the controller as evidenced by their respective sign-offs.Which of the following types of audit procedures do these actions illustrate?

An auditor who discovers that client employees have committed an illegal act that has a material effect on the client's financial statements most likely would withdraw from the engagement if