Exam 6: Employee Fraud and the Audit of Cash

The mail which includes payments should be opened by two people.This control is called

Your client is in the process of acquiring another company.You have been requested to verify that cash for the company being acquired is properly stated.The audit technique that will yield the most persuasive evidence is

Auditors ordinarily send a standard confirmation request to all banks with which the client has done business during the year under audit,regardless of the year-end balances.A purpose of this procedure is to

In order for auditors to be able to recognize potential fraud,they must be aware of the basic characteristics of fraud.Which of the following is not a characteristic of fraud?

An audit plan of substantive procedures for cash would not include

When an employee embezzles company funds from an electric utility company for the purpose of paying expenses of an anti-nuclear protest organization,the fraudster's motive is said to be

When you examine canceled checks returned in the bank statement by a client's bank,how could you tell whether the amount on the check had been skillfully raised (increased,say,from $75.00 to $7,500 in the amount box,and altered in the written line from "Seventy-five dollars" to "Seventy-five hundred dollars")after the check was cleared by the bank? (An employee might do this to "support" a $7,500 cash disbursement journal entry.)

To provide assurance that each voucher is submitted and paid only once,an auditor most likely would examine a sample of paid vouchers and determine whether each voucher is

Ed's wife Diane owns a printing business in town.Ed works in the accounts payable department of Jiffy Abs Vitamin Company.Diane prints invoices for work supposedly done for Jiffy Abs (no actual work was performed)and Ed places in the invoice in the approved for payment invoice pile.Jiffy Abs pays these invoices and sends Diane a check. 1.Name two internal controls that might prevent or detect these fraudulent payments. 2.Name two audit procedures that might detect this fraud.

An entity with a large volume of customer remittances by mail could most likely reduce the risk of employee misappropriation of cash by using

Describe how a lockbox works and indicate the advantages of such a system.

Most fraud investigators utilize the fraud triangle theory.A new theory called the fraud diamond has been proposed.Which of the following is an element of the fraud diamond and is not an element of the fraud triangle?

Which of the following statements is correct with respect to the elements of the "fraud triangle"?

At the end of each business day,Safe Company sends its bank a listing of all checks written during the day including the check number,payee,and amount.When a check is sent to the bank for payment the bank compares the payee and the amount with the listing provided by Safe Company.This system is called

Micro Chip Corporation (MCC)has a special PO Box for customer payments.Jane is responsible for: • going to the post office every day, • emptying the post office box, • opening the mail, • making a prelist, • sending the remittance advices to accounts receivable,and • sending the checks to the cashier's office. Jane has opening a business account at her bank for Master Cleaning Company (MCC).Several of Micro Chips checks are made out with only the initials MCC.Jane selects certain checks made out only with the initials MCC and deposits them in her business account.She would destroy the remittance advice. 1.Name two controls that would prevent or detect this fraud. 2.Name two audit procedures that might detect this fraud.

Which of the following sets of information does an auditor usually confirm on one form?

Which of the following is not considered one of the three factors increasing the probability of fraud?

A proof of cash

An unrecorded check issued during the last week of the year would most likely be discovered by the auditor when the

To gather evidence regarding the bank's balance in a bank reconciliation,an auditor would examine all of the following except the