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exam 3 312g practice

Lack of segregation of duties among those completing checks, recording checks, signing checks, and reconciling bank statements
Which of the following risks allows the perpetrator to hide the theft in the accounting records?
a. Checks issued payable to cash
b. Lack of segregation of duties among those completing checks, recording checks, signing checks, and reconciling bank statements
c. Lack of matching documentation
d. Checks made payable to authorized signer
Checks created and forged resulting in duplicate or out-of-sequence checks
Which of the following types of fraud would most likely be perpetrated by someone outside the organization?
a. Blank checks are not locked in cabinets
b. Voided checks are altered and forged

c. Checks created and forged resulting in duplicate or out-of-sequence checks
d. Blank checks are not safeguarded with passwords

Immediate delivery of check to payee after signing
Which of the following procedures best prevents interception of checks?
a. Waiting for vendor to contact company before sending check
b. Mailing checks the following business day
c. Locking checks in cabinet until delivery
d. Immediate delivery of check to payee after signing
Check made out to an authorized signer and signed by the authorized signer
Which of the following is not a forgery scheme?
a. Endorsement made by unauthorized person
b. Check signed by unauthorized person
c. Authentic check altered by unauthorized person
d. Check made out to an authorized signer and signed by the authorized signer
Authorized makers have better opportunity than forgers to perpetrate the fraud
Why do authorized maker frauds have a higher likelihood of occurring than forgery frauds?
a. Authorized makers have more ethics than forgers to perpetrate the fraud
b. Authorized makers have better opportunity than forgers to perpetrate the fraud
c. Authorized makers have more need than forgers to perpetrate the fraud
d. Authorized makers have more rationalization than forgers to perpetrate the fraud
Hard work
According to the case, all of the following disproportionately impact employment opportunities in France EXCEPT:
a. Socio-economic status
b. Hard work
c. Educational background
d. Hierarchical society
Used his friendly nature to influence back office personnel
Kerviel used all of the following methods to circumvent controls and conceal unauthorized trades EXCEPT:
a. Used his friendly nature to influence back office personnel
b. Preparing false documents to corroborate trades
c. Voiding warning messaged triggered by unauthorized trades
d. Created phony emails from superiors authorizing illicit transactions
e. Manufacturing impressive impromptu explanations for apparent irregularities
Derivatives
French banks are best known for the development of which of the following?
a. Derivatives
b. Joint auditing
c. Stocks
d. Bouton Report
Protect domestic auditing firms
Why were joint audits primarily developed?
a. Improve audit quality
b. Improve disclosures
c. Protect domestic auditing firms
d. Increase audit fees
IFRS and U.S. GAAP are equivalent for financial accounting and reporting
What was NOT a major criticism in the case regarding International Financial Reporting Standards (IFRS)?
a. IFRS allows creative accountants to use accounting tricks and is a step backward for comparability
b. Use of the “true and fair override” resulted in backdated losses that were inappropriate
c. IFRS encourages self-interested accounting and financial reporting
d. IFRS and U.S. GAAP are equivalent for financial accounting and reporting
True
The chief audit executive must establish and maintain a system to monitor the disposition of results communicated to management.
True
False
True
The chief audit executive must establish a follow-up process to monitor and ensure that management actions have been effectively implemented or that senior management has accepted the risk of not taking action.
True
False
True
The internal audit activity must monitor the disposition of results of consulting engagements to the extent agreed upon with the client.
True
False
False
When the chief audit executive concludes that management has accepted a level of risk that may be unacceptable to the organization, the chief audit executive must discuss the matter with the board.
True
False
Management assertions
The identification of risk accepted by management may be observed through all of the following methods EXCEPT:
a. Management assertions
b. Consulting engagements
c. Actions taken by management as a result of prior engagements
d. Assurance engagements
Matches documentation and approves disbursements
Which of the following is not a compatible function and therefore should be segregated from the other three?
a. Approves authorized limits for checks
b. Matches documentation and approves disbursements
c. Approves cash disbursement policies
d. Approves authorized signers on bank account
Reconciling bank statement
Which of the following is a detection control?
a. Reconciling bank statement
b. Signing check
c. Authorizing disbursement
d.Recording disbursement
Unauthorized checks
Investigating out-of-sequence or duplicate checks helps detect which type of fraud?
a. Unauthorized checks
b. Forged endorsements
c. Altered checks
d. Authorized maker checks
Vendor payment complaints investigated by someone independent of purchasing, accounts payable, or cash functions
Which is the best control to detect endorsement forgeries?
a. All checks are completely filled in with permanent ink and copied before signing and prompt delivery
b. Organization investigates out-of-sequence or duplicate checks on bank statement
c. Vendor payment complaints investigated by someone independent of purchasing, accounts payable, or cash functions
d. Cancelled checks are examined for matching payee, amount, signature, and endorsement
Checks are altered after signing
Which is not a red flag for authorized maker fraud schemes?
a. Checks are made payable to cash disbursement custodian
b. Checks are made payable to cash
c. Checks are altered after signing
d. Checks are made payable to relatives of cash disbursement custodian
Donated large amounts of money to the organization
The individual who embezzled funds from the East Lansing, Michigan chapter of the United Way did all of the following EXCEPT:
a. Wrote checks to herself
b. Forged signatures of check cosigners
c. Donated large amounts of money to the organization
d. Kept the organization’s books
e. Destroyed cancelled checks mailed back by bank
The charitable sector has strong regulatory oversight
Which of the following statements is false?
a. Annual theft losses for charitable organizations is approximately $40 billion annually
b. 95% of losses suffered by charities result from cash thefts
c. The charitable sector has strong regulatory oversight
d. A research study estimates that one in eight dollars contributed to charitable organizations is stolen each year
e. The perpetrator for charity thefts generally serves in a financial function
Productive
State agencies overseeing charitable organizations are generally all of the following EXCEPT:
a. Inactive
b. Understaffed
c. Productive
d. Ineffective
Tax status
Which is not a major problem faced by United Way?
a. Intense and growing competition for donations
b. Tax status
c. Highly publicized and embarrassing embezzlements
Controls are adequate for most charities
Which of the following statements is false?
a. Charities reduced administrative costs including accounting and control costs
b. Many charities have inadequate or non-existant internal controls
c. Controls are adequate for most charities
d. Fewer than 15% of United Way of America local chapters have written accounting and control policies
Yes
Checks are numbered sequentially
Yes
No
No
Checks are used in numerical sequence
No
Yes
No
System-generated checks are password protected so only cash disbursement custodian can create checks
Yes
No
Yes
Proper approval provided before creating a check
Yes
No
Yes
Supporting documentation is stamped “paid” after creating check
Yes
No
Yes
Copy of each completed check with its supporting documentation is forwarded to recorder
No
Yes
Yes
Check payee, amount, and purpose match supporting documentation
Yes
No
No
Checks are not split
No
Yes
No
Recorder and examiner are provided a listing of completed checks
No
Yes
Yes
Checks are signed only by authorized signer(s)
No
Yes
Yes
Checks over $5,000 require two signatures
No
Yes
No
Checks are distributed immediately in person or via mail
No
Yes
No
Checks are not made payable to cash
Yes
No
No
Checks are not made payable to cash disbursement custodian, his/her relatives, significant others, or other related parties
No
Yes
No
Individuals completing checks, recording checks, signing and delivering checks, and reconciling bank statements are segregated
Yes
No
No
Complete supporting documentation is matched and approved by non-cash disbursement custodian before creating check
No
Yes
No
Blank checks are safeguarded through passwords or locked cabinets and only accessible by the cash disbursement custodian
No
Yes
No
Voided checks are promptly mutilated and retained so they cannot be altered or used
Yes
No
Yes
Organization investigates out-of-sequence or duplicate checks on bank statement
Yes
No
No
All checks are completely filled in with permanent ink and copied before signing and prompt delivery
No
Yes
Yes
Cancelled checks are examined for matching payee, amount, signature, and endorsement
Yes
No
No
Vendor payment complaints investigated by someone independent of purchasing, accounts payable, or cash functions
No
Yes
True
The chief audit executive must effectively manage the internal audit activity to ensure it adds value to the organization.
True
False
The internal audit activity conforms with the Standards and the Code of Ethics
The internal audit activity is effectively managed when it does all of the following EXCEPT:
a. The results of the internal audit activity’s work achieve the purpose and responsibility included in the internal audit charter
b. The internal audit activity conforms with the Definition of Internal Auditing and the Standards
c. The individuals who are part of the internal audit activity demonstrate conformance with the Code of Ethics and the Standards
d. The internal audit activity conforms with the Standards and the Code of Ethics
True
The internal audit activity adds value to the organization (and its stakeholders) when it provides objective and relevant assurance, and contributes to the effectiveness and efficiency of governance, risk management, and control processes
True
False
Inspect cancelled checks for authorized endorsements
All of the following are key audit procedures for authorized maker schemes EXCEPT:
a. Analyze cash disbursements for checks made payable to cash disbursement custodian
b. Review segregation of duties chart for individuals performing incompatible duties
c. Analyze cash disbursements for checks made payable to cash or in the name of the organization
d. Inspect cancelled checks for authorized endorsements
Inspect cancelled checks for matching payee and amount
The most important audit test for detecting alteration forgeries is
a. Evaluate the adequacy of security of blank checks
b. Inspect cancelled checks for matching payee and amount
c. Analyze bank statements for out of sequence or duplicate checks
d. Observe vendor complaint process
For a sample of cash disbursements, inspect supporting invoices for “paid” stamp
All of the following are examples of authorization audit procedures EXCEPT:
a. Inspect cancelled checks for authorized signatures
b. For cash disbursements over $5,000, inspect cancelled checks for two authorized signatures
c. Analyze checks for payments to same vendor within one week where combined amounts exceed check authorization limit
d. For a sample of cash disbursements, inspect supporting invoices for “paid” stamp
Observe check creation and delivery process
The most important audit procedure to evaluate the prevention of intercepted checks-alteration and endorsement forgeries is
a. Analyze bank statements for out of sequence or duplicate checks
b. Read vendor payment complaint policies/processes and observe vendor payment complaint process to assess appropriate segregation of duties
c. Observe check creation and delivery process
d. For a sample of cash disbursements, compare cancelled check to cash disbursements journal for matching payee and amount. Also, inspect for authorized signature and endorsement
Review segregation of duties chart for individuals performing incompatible duties. While reviewing approvals, compare to segregation of duties chart.
The most important audit procedure to evaluate the prevention of authorized maker schemes is
a. For a sample of cash disbursements, inspect cancelled checks for authorized signatures
b. Analyze cash disbursements for checks made payable to cash or in the name of the organization
c. Analyze cash disbursements for checks made payable to cash disbursement custodian, his/her relatives, significant others, or other related parties or for their personal benefit
d. Review segregation of duties chart for individuals performing incompatible duties. While reviewing approvals, compare to segregation of duties chart.
Prepared payroll checks
A lack of segregation of duties allowed the Financial Secretary at Timpview High School to do all of the following incompatible duties EXCEPT:
Prepared and signed checks
Prepared bank reconciliation
Entereasdd transactions, made adjustments and writeoffs, and had sole custody of the general ledger system
Correct!
Prepared payroll checks
No
Blank checks are safeguarded through passwords or locked cabinets and only accessible by the cash disbursement custodian
No
Yes
No
Voided checks are promptly mutilated and retained so they cannot be altered or used
Yes
No
Yes
Organization investigates out-of-sequence or duplicate checks on bank statement
Correct!
Yes
No
No
Blank checks are safeguarded through passwords or locked cabinets and only accessible by the cash disbursement custodian
No
Yes
Reimbursements and disbursements initiated by the Principal are approved by a supervisor
All of the following were noted as inadequate internal controls by the internal auditors EXCEPT:
a. Reimbursements and disbursements initiated by the Principal are approved by a supervisor
b. The Timpview High School (THS) Financial Secretary reported that THS does not have petty cash funds. Instead, checks are written to the bank and cashed for petty cash type transactions, travel advances, and change fund establishment.
c. There is a charge account at a local gas station for driver’s education fuel charges. There are no logs, receipt copies, or any sort of reconciliation methods currently in use to track what charges are being made to the account, or to provide any method by which the Drivers Education Coordinator could review and approve monthly invoices. A risk exists that unauthorized users could make charges to the THS account that would remain undetected
d. Approvals for many purchases or reimbursements are obtained after the purchases have already occurred, effectively making any effort to monitor or approve purchases meaningless
Undocumented payment of $10,000 to principal
Timpview High School questionable or unusual expenditures included all of the following EXCEPT:
a. Flooring for football complex for $4,000 was billed to a third party
b. Undocumented payment of $10,000 to principal
c. Check payable to bank for $300
d. Personal vehicle repairs paid by Timpview High School totaling $759.84
Artificially reduced expenditures in the football activity account
What were some of the effects of unsupported journal entries and transfers?
a. More expenses were transferred from the administration to football than vice versa
b. Transferred expenses from football to girls basketball
c. Artificially reduced expenditures in the football activity account
d. Transferred $10,000 in fundraising money from football to soccer
Football and drivers education had different fiscal custodians
Which of the following is false regarding the sampling of expenditure transactions for football and drivers education?
a. Tested 85 items
b. Tested 53 percent of expenditure dollars
c. Football and drivers education had different fiscal custodians
d. Tested 11 percent of transactions
False
The chief audit executive must establish a risk-based plan to determine the priorities of the internal audit activity, inconsistent with the organization’s goals.
True
False
The chief executive officer is responsible for developing a risk-based plan.
Which of the following is false?
a. The chief audit executive takes into account the organization’s risk management framework, including using risk appetite levels set by management for the different activities or parts of the organization.
b. The chief executive officer is responsible for developing a risk-based plan.
c. If a framework does not exist, the chief audit executive uses his/her own judgment of risks after consideration of input from senior management and the board.
d. The chief audit executive must review and adjust the plan, as necessary, in response to changes in the organization’s business, risks, operations, programs, systems, and controls.
True
The internal audit activity’s plan of engagements must be based on a documented risk assessment, undertaken at least annually. The input of senior management and the board must be considered in this process.
True
False
True
The chief audit executive must identify and consider the expectations of senior management, the board, and other stakeholders for internal audit opinions and other conclusions.
True
False
True
The chief audit executive should consider accepting proposed consulting engagements based on the engagement’s potential to improve management of risks, add value, and improve the organization’s operations. Accepted engagements must be included in the plan.
True
False
Completeness
One of the most important assertions for cash receipts is
Classification
Uniqueness
Occurrence
Completeness
Skimming transactions are not recorded but larceny transactions are recorded
Which of the following is true?
Both skimming and larceny transactions are recorded

Larceny transactions are not recorded, but skimming transactions are recorded

Neither skimming nor larceny transactions are recorded

Skimming transactions are not recorded but larceny
transactions are recorded

Not posting receipt to customer account
All of the following are methods for hiding larceny of accounts receivable thefts EXCEPT:
Making unauthorized adjustment to customer account
Not posting receipt to customer account
Destroying records
Making unauthorized adjustment to general ledger
Not recording the sale
All of the following are methods for hiding theft for a larceny of sales scheme EXCEPT:
Altering the cash count
Not recording the sale
Replacing stolen cash with false checks
Altering or destroying cash register tapes
Employee deposits unexpected receipts then withdraws and steals the amount deposited
All of the following are methods for stealing recorded deposits EXCEPT:
Employee steals the deposit then hides the theft by replacing it with the following day’s deposit
Employee deposits unexpected receipts then withdraws and steals the amount deposited
Employee steals cash from the deposit and hides the theft by adjusting the records or reconciliation
Employee steals cash from the deposit and uses deposits in transit to hide the theft
Significantly increased profits
Campbell made all of the following strategic changes during the early to mid-1980s EXCEPT:
Financed an aggressive expansion program
Sold debt securities for the first time
Released more than 300 new products
Significantly increased profits
Trade loading improved long term revenues and profitability
All of the following are true regarding trade discounts EXCEPT:
Trade discounts were used when a company appeared to fall short of revenue or expense targets
Trade discounts were offered at the end of account period to entice customers to buy items they would otherwise defer
Excessive trade loading made it difficult for Campbell to meet revenue and earnings profits
Trade loading improved long term revenues and profitability
Large trade discounts recorded as reductions of gross revenue
All of the following were violations of generally accepted accounting principles EXCEPT:
Large trade discounts recorded as reductions of gross revenue
Shipping to the yard
Large trade discounts recorded as selling, general and administrative expenses
Guaranteed sales
Goods shipped FOB destination on 12/31/12 arrived at customer place of business on 1/3/13
Sales for a shipment on 12/31/12 were booked as revenue on 12/31/12. Which of the following situations would cause sales at 12/31/12 to be overstated?
Goods shipped FOB destination on 12/31/12 arrived at customer place of business on 12/31/12
Goods shipped FOB destination on 12/31/12 arrived at customer place of business on 1/3/13
Goods shipped FOB shipping point on 12/31/12 arrived at customer place of business on 12/31/12
Goods shipped FOB shipping point on 12/31/12 arrived at customer place of business on 1/3/13
Company did not record appropriate sales return reserves
What was the major reporting problem with the “guaranteed sales?”
Guaranteed sales involved shipping orders to the warehouse
The practice is fraudulent
Customers did not have an unconditional right of return of the product
Company did not record appropriate sales return reserves
True
The chief audit executive must communicate the internal audit activity’s plans and resource requirements, including significant interim changes, to senior management and the board for review and approval.
True
False
False
The chief audit executive may communicate the impact of resource limitations to senior management and the board.
True
False
Timely
In order to achieve the approved plan, the chief audit executive must ensure that internal audit resources are all of the following EXCEPT:
Sufficient
Effectively employed
Appropriate
Timely
True
Appropriate refers to the mix of knowledge, skills, and other competencies needed to perform the plan.
False
True
True
Resources are effectively deployed when they are used in a way that optimizes the achievement of the approved plan.
True
False
Completeness
Which is the most important management assertion for cash receipts?
Authorization
Occurrence
Completeness
Classification
Record the receipt of cash
Which of the following would not be a segregation of issues problem for someone who accepts cash receipts?
Record the receipt of cash
Reconcile the bank statement
Adjust the customer account for returns and voids
Adjust the general ledger
Monthly statements mailed to customers showing payments and payment complaints investigated by independent employee
What is the most important detection control for accounts receivable skimming?
Cash and accounts receivable personnel do not have access to general ledger system
Cash and accounts receivable personnel do not authorize write off of receivables
Monthly statements mailed to customers showing payments and payment complaints investigated by independent employee
Two people open and record all payments received through the mail
Visibly post notice to customers for free or discounted goods or services if they do not receive a sales receipt
What is the most important detection control for sales skimming?
Require employees to give receipts for all sales to customers
Cash register tape copied electronically by system
Visibly post notice to customers for free or discounted goods or services if they do not receive a sales receipt
Security cameras and frequent visible and covert monitoring of sales transactions
Authorization
What is the most important management assertion for larceny using false voids and refunds?
Occurrence
Completeness
Uniqueness
Authorization
Troberg Stores caused Kirby to take the polygraph examination
For which of the following allegations did the judge rule in favor of Troberg Stores?
Troberg Stores caused Kirby to take the polygraph examination
Troberg disciplined Kirby on the basis of the polygraph results
None of the above
Troberg improperly used the polygraph results
Troberg constructively discharged Kirby on the basis of the polygraph results
None of the answers are exceptions to the EPPA
The Employee Polygraph Protection Act (EPPA) makes it unlawful, unless otherwise excepted by the act, for any employer engaged in commerce to do all of the following EXCEPT:
Directly or indirectly to require, request, suggest, or cause any employee or prospective employee to take or submit to any lie detector test
To dischare, disicipline, discriminate against in any manner, or deny employment or promotion to, or threaten to take any action against any employee or prospective employee on the basis of the results of any lie detector test
To dischare, disicipline, discriminate against in any manner, or deny employment or promotion to, or threaten to take any action against any employee or prospective employee who refuse, declines, or fails to take or submit to any lie detector test
None of the answers are exceptions to the EPPA
To use, accept, refer to, or inquire concerning the results of any lie detector test of any employee or prospective employee
The employee volunteers to participate in a polygraph test
EPPA Sections 2006 and 2009 do not prohibit an employer from requesting an employee to submit to a polygraph test if it follows all of the following steps EXCEPT:
The employer had a reasonable suspicion that the employee was involved in the incident or activity under investigation
The employer executes a statement provided to the examinee that meets multiple criteria stated in the EPPA
The employee had access to the property that is the subject of the investigation
The employee volunteers to participate in a polygraph test
The judge only awarded damages for lost wages and employment benefits
The judge in the case noted all of the following EXCEPT:
Troberg could have taken advantage of the EPPA ongoing investigation exemption with little risk of legal reprisal
The judge only awarded damages for lost wages and employment benefits
Kirby may have committed theft from the cash register
Troberg could have dismissed Kirby immedialey following the May 1995 theft with little risk of repurcussion
Segregation of duties
Which of the following internal controls would have best reduced the likelihood of Troberg’s cash thefts?
Proper reconciliation of cash receipts
Proper recording of sales
Segregation of duties
Invigilation
Yes
Cash receipts are numbered sequentially
Yes
No
Yes
Cash receipts are used in numerical sequence
Yes
No
No
System-generated cash receipts are password protected so only cash receipt custodian can create cash receipts
Yes
No
No
Intact bank deposits are made each business day for the full amount of day’s cash receipts
No
Yes
Yes
Recorder and examiner are provided a listing of cash receipts and cash deposits
No
Yes
No
Employees who accept customer payments and record the receipt in the customer account cannot adjust customer accounts
Yes
No
No
Employees who accept customer payments and record the receipt in the customer account cannot adjust general ledger
No
Yes
No
Bank accounts are reconciled on a monthly basis using a proof of cash by an employee who does not handle cash receipts or disbursements
Yes
No
Yes
Duplicate records should be maintained and secured from employees who handle cash transactions
Yes
No
No
Two people open and record all payments received through the mail
Yes
No
No
Monthly statements mailed to customers showing payments and payment complaints investigated by independent employee
Yes
No
No
Cash and accounts receivable personnel do not authorize write off of receivables
Yes
No
No
Cash and accounts receivable personnel do not have access to general ledger system
No
Yes
Yes
Require employees to give receipts for all sales to customers
No
Yes
No
Visibly post notice to customers for free or discounted goods or services if they do not receive a sales receipt
Yes
No
No
Where possible, segregate recording of sale from handling of cash or merchandise
Yes
No
No
Analyze gross margin trends for unusual variances
No
Yes
Yes
Security cameras and frequent visible and covert monitoring of sales transactions
Yes
No
Yes
Cash register tape copied electronically by system
No
Yes
Yes
Register totals checks, credit cards, and cash separately
Yes
No
Yes
Cash counted by register operator and cash custodian and compared to register totals
Yes
No
No
Only one person assigned to each cash drawer with physical or logical protection for each register
No
Yes
Yes
Require distinct log-in codes for each employee and manager, in order to track voids and returns
Yes
No
No
Require customer signature and management approval of all voids and returns in presence of customer
No
Yes
Yes
Original sales receipts required for sales returns and voids
No
Yes
Yes
Require management physical verification of returned items before approving refund
No
Yes
No
Compare sales credit card number with refund credit card number
No
Yes
No
Segregation of duties among those who prepare and take deposit to the bank, record deposit, and reconcile the bank statement
No
Yes
No
Proof of cash reconciles deposits in transit to books for proper cutoff
No
Yes
No
Proof of cash identifies all cash receipts and disbursements and reconciles to records
No
Yes
No
Recorded deposit dates are reconciled with bank statement deposit dates
No
Yes
True
The chief audit executive must establish policies and procedures to guide the internal audit activity.
True
False
Budget of the internal audit activity
The form and content of policies and procedures are dependent upon all of the following EXCEPT:
Budget of the internal audit activity
Complexity of the work
Size of the internal audit activity
Structure of the internal audit activity
True
The chief audit executive should share information and coordinate activities with other internal and external providers of assurance and consulting services to ensure proper coverage and minimize duplication of efforts.
True
False
True
When an external service provider serves as the internal audit activity, the provider must make the organization aware that the organization has the responsibility for maintaining an effective internal audit activity.
True
False
Skimming of sales
The transaction is not recorded in the records for which type of fraud?
Larceny of accounts receivable
Larceny of cash deposits
Skimming of sales
Larceny of sales
Observation
What is the most important type of audit procedure to detect skimming?
Confirmation
Inspection
Inquiry
Observation
Compare ending bank reconciliation to balance per books
Which of the following types of audit procedures is NOT designed to assess bank deposit skimming or larceny?
Investigate deposits in transit that do not clear the bank on the following bank business day
Compare ending bank reconciliation to balance per books
Review proof of cash for cash receipts and cash disbursements that are not recorded in the organization records
Observe cash deposit process to assess whether or not the process is in compliance with the segregation of duties chart
Hides the theft by replacing stolen cash with false checks
The main reason for tracing a sample of the day’s sales total checks, credit card transactions, and cash transactions to the bank deposit is to assess which risk event?
Hides the theft by altering the cash count
Hides the theft by replacing stolen cash with false checks
Hides cash receipts theft by altering or destroying cash register tapes
Employee steals cash from registers not assigned to him so the theft cannot be traced to him
Skimming of sales
If an auditor notices a decrease in gross margin over time, it could indicate
Skimming of sales
Larceny of deposits
Decrease in cost of goods sold
Larceny of sales
Tuition reimbursements
Embassy employees embezzled funds from all of the following transactions EXCEPT:
Healthcare payments for families
Tuition refunds
Tuition reimbursements
El-Hadad
Who was not immediately terminated from employment because of the embezzlements?
Deputy cultural attache
El-Hadad
Embassy’s chief accountant
Cultural attache
Falsifying his own performance evaluations
El-Hadad was accusued of all of the following EXCEPT:
Expense reimbursements to which he was not entitled
Compensation for overtime he had not worked
Falsifying his own performance evaluations
Payment of healthcare premiums for his family
The federal court did not have jurisdiction in the case
The federal judge ruled in favor of El-Hadad in all of the following areas EXCEPT:
El-Hadad had been defamed by former employer
El-Hadad had been victimized by false charges intended to discredit him
The federal court did not have jurisdiction in the case
Defamation by former employer ended El-Hadad’s career
Sovereign immunity because it was a foreign embassy
How did the UAE attorneys attempt to have the lawsuit dismissed?
Sovereign immunity because it was a foreign embassy
El-Hadad did not pay U.S. income taxes
El-Hadad was employed by a foreign government
Commercial activity exception
Internal audit activity’s budget
The chief audit executive must report periodically to senior management and the board on all of the following relative to its plan EXCEPT:
Internal audit activity’s budget
Internal audit activity’s responsibility
Internal audit activity’s authority
Internal audit activity’s purpose
Internal audit activity’s performance
Time spent on audits
Reporting to senior management and the board must include all of the following EXCEPT:
Time spent on audits
Other matters needed or requested by senior management and the board
Governance issues
Significant risk exposures
Fraud risks
Significant control issues
True
The frequency and content of reporting are determined in discussion with senior management and the board.
True
False
True
The frequency and content of reporting depend on the importance of the information to be communicated.
True
False
True
The frequency and content of reporting depend on the urgency of the related actions to be taken by senior management or the board.
True
False
Existence and Valuation
What are the primary management assertions for cash balances?
Completeness and Rights and Obligations
Existence and Presentation and Disclosure
Existence and Valuation
Completeness and Valuation
Authorized signor mails the confirmation
Which of the following steps is not part of the confirmation process for cash balances?
The mailed envelope included a stamped envelope addressed directly to the auditor
Auditor uses the “Standard Form to Confirm Account Balance Information with Financial Institutions”
The authorized signor signs the form in the presence of the auditor
Authorized signor mails the confirmation
Used to audit deposits in transit and outstanding checks
What is the primary purpose of the cutoff bank statement?
Used in the proof of cash to reconcile cash receipts and cash disbursements
Confirms ending cash balance
Used to audit deposits in transit and outstanding checks
Used to detect unrecorded receipts and disbursements
Uncovers incorrectly recorded interbank transfers
Which of the following is not a benefit of a proof of cash?

Uncovers incorrectly recorded interbank transfers
Auditor can trace cash receipts and cash disbursements directly to respective journals
Helps detect unrecorded cash receipts and cash disbursements
Provides a separate reconciliation of cash receipts and cash disbursements

Cash deposit per books recorded in December and corresponding cash disbursement per books recorded the following January
For financial reporting purposes, which if the most serious concern for the auditor regarding the interbank transfer schedule?
Cash disbursement per bank recorded in December and corresponding cash deposit per bank recorded the following January
Cash deposit per bank recorded in December and corresponding cash disbursement per bank recorded the following January
Cash disbursement per books recorded in December and corresponding cash deposit per books recorded the following January
Cash deposit per books recorded in December and corresponding cash disbursement per books recorded the following January
Maintaining a vault general ledger proof sheet that reconciled with cash on hand
According to the case, all of the following practices were unusual or not normal EXCEPT:
Substantial portion of bank’s cash was inaccessible for an extended period of time
Segregating a large amount of cash in the locked cabinet
Substantial portion of bank’s assets were not invested and earning interest for an extended period of time
Maintaining a vault general ledger proof sheet that reconciled with cash on hand
Placed audit seals on the doors of the cabinet
When the internal auditors could not count the cash that was supposedly locked in the cabinet during their surprise count, what should they have done?
Performed a surprise cash count at another location
Counted the cash when the person with the key returned
Accepted management’s representation that the cash was in the locked cabinet without doing additional procedures
Placed audit seals on the doors of the cabinet
The amount of cash in the locked cabinet on January 14, 1988 was $2.7 million
Which of the following was NOT a deception on the part of the bank’s employees?
The amount of cash in the locked cabinet on January 14, 1988 was $2.7 million
Explanation for why a large amount of cash was segregated in the locked cabinet
Description of the three key security system
Concealment of the cash shortage by Cordova and subordinates
Obtained documentation for the liability from CNB personnel
The staff auditors failed to do all of the following EXCEPT:
Confirmed liability with customer
Obtained documentation for the liability from CNB personnel
Confirmed that customer cashed a large certificate of deposit
Acquired corroboraing evidence for customer’s planned use of funds
Cardova was not prohibited from serving as an officer or director of a public company
Which of the following is false?
CapitalBank was declared insolvent and place under control of FDIC
Cardova was not prohibited from serving as an officer or director of a public company
Cardova pleaded guilty to bank fraud and conspiracy to commit bank fraud
Cardova missappropriated at least $400,000

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