In delivering confirmations to intended recipients, it is acceptable for the auditor to allow the client to control the mailing.
True
False
False
Use of positive confirmations provides better audit evidence than use of negative confirmations.
True
False
True
The audit team should immediately perform document-vouching procedures to audit the account if a response is not received to the first confirmation request.
True
False
False
The primary concern when considering confirmation of accounts receivable before the balance sheet date is audit staff availability and resource requirements.
True
False
False
The accountants who record cash receipts and credits to customer accounts should not handle the cash.
True
False
True
The bank reconciliation should be done by someone other than the accountant, such as the office manager or administrative assistant.
True
False
True
audit objective:
expression of a financial statement assertion for which evidence needs to be obtained.
cheque kiting:
the illegal practice of building up apparent balances in one or more bank accounts based on uncollected (float) cheques drawn against similar accounts in other banks.
cutoff bank statement:
auditors' information source for vouching the bank reconciliation items; a complete bank statement including all paid cheques and deposit slips received directly by the auditors.
detail test of control procedure:
consists of (1) identification of the data population from which a sample of items will be selected for audit and (2) an expression of the action that will be taken to produce relevant evidence. In general, the actions in detail test of control audit procedures involve vouching, tracing, observing, scanning and recalculating.
detection rate:
ratio of the number of exceptions reported to auditors to the number of account errors.
dual-purpose procedure:
an audit procedure that simultaneously serves the substantive purpose (obtain direct evidence about the dollar amounts in account balances) and the test of controls purpose (obtain evidence about the company's performance of its own control procedures).
fidelity bond:
an insurance policy that covers most kinds of cash embezzlement losses.
paper trail:
set of telltale signs of erroneous accounting, missing or altered documents or a "dangling debit" (the false or erroneous debit that results from an overstatement of assets).
response rate:
for positive confirmations is the proportion of the number of confirmations returned to the number sent, generally after the audit team prompts recipients with second and third requests. Research studies have shown response rates ranging from 66 to 96 percent.
test of controls:
ordinary and extended procedures designed to produce evidence about the effectiveness of client controls that should be in operation.
