1.

Fund for noncurrent operations

- are part of noncurrent assets and should not be included as part of cash

2. Pension fund

- Generally, noncurrent in PACIS) but if the related liability is current, the funds is included as cash

3. Preferred redemption fund

- Noncurrent investment unless the preferred share has a mandatory redemption and if redeemable

4. Acquisition of property, plant and equipment

- Always noncurrent even if expected to be disbursed next year

5. Cash equivalents

- are short-term and highly liquid investments that are readily convertible into cash and so near their
maturity that they present insignificant risk of changes in value because of changes in interest rates.

6. Cash in foreign currency

- Should be translated to Philippine Peso using the closing rate or spot rate at the reporting date.

7. Cash in closed bank / banks in bankruptcy

- Measured at estimated realizable value and be included among noncurrent assets if the amount
recoverable is lower than face value.

8. Compensating balance

- is minimum checking account balance that must be maintained in connection with a borrowing
agreement with a bank

9. Bank overdraft

Negative balance in the cash in bank account.

10. Stale checks/checks long outstanding

- Checks not encashed by the payee with a relatively long period of time. Under current banking
practice, checks are considered stale if not encashed within 6 months from its date

11. Postdated checks

12. Equity securities

- Generally cannot be classified as cash equivalents because equity securities do not have a maturity
date (with the exception of redeemable preference shares)

13. Callable preference shares

- Not classified as cash equivalents. It is part of shareholder's equity on the part of issuer and part of
long-term investment of the holder

14. NSF - no sufficient funds

DAUD - drawn against uncleared deposits

DAIF - drawn against insufficient funds

15. Temporary investments in shares of stocks

- Either FVTPL or FVTOCI but never to be included as part of cash & cash equivalents

16. Unused credit line

- Difference between the amount of line of credit applied for and approved by a bank and the amount
actually borrowed

17. Treasury warrants

- A warrant for the payment of money into or from public treasury.

18. Escrow deposit

- Restricted amount held in trust for another party, e.g., a deposit required by a court of law for a
pending case

19. Certificate of deposit (CD) for time deposits

- A savings certificate entitling the bearer to receive interest

20. CD bears a maturity date, a specified fixed interest rate and can be issued in any denomination. CDs
are generally issued by commercial banks and are insured by the PDIC. The term of a CD generally
ranges from one month to five years.
20. Postage stamps on hand

- Should be reported as office supplies or as a prepaid expense

21. Bank overdraft

- was netted or deducted from cash in bank but should be presented as current liability should be added
back to compute for the correct balance of cash in bank.

22. Existence or occurrence

- All receivables on the statement of financial position are authentic claims of the entity and all sales
have really occurred and pertain to the entity

23. Completeness

- All authentic claims of the entity for amounts receivable are included on the statement of financial
position and all sales have been included in the statement of comprehensive income

24. Valuation and allocation

-Receivables are carried at their net realizable (collectable) value (i.e., the gross receivables are properly
stated with appropriate allowances provided for doubtful accounts, discounts, returns, warranties and
similar items)

25. Accuracy

- Sales have been accurately recorded in the statement of comprehensive income.

26. First step in the audit of receivable is to obtain an aged trial balance of receivable.

27. The primary audit procedure to verify the existence and gross valuation of receivable is through
confirmation.

28. confirmation should only be performed once the auditor has already reconciled the subsidiary ledger
with the general ledger. Ordinarily, confirmation is used unless:

29. Positive Confirmation.

- It is sent to customer of the client by the auditor Pequesting a response directly as to whether the
stated amount owed is correct or incorrectheir decorequest the customer to provide specific
Information, such as their account balance with the entity (referred to as a blank form). This type of
confirmation is specifically used when

30. Negative confirmation. It is sent to customer of the client by auditor requesting a response only if
the customer disagrees with the amount stated on the confirmation

31. Positive confirmation is considered to provide more reliable audit evidence; however, it is more
costly compared to negative confirmation

32. The confirmation request should describe that it is not a request for payment, but merely to confirm
the account;

33. The confirmation request should be prepared and sent to the customer under the control of the
auditor;

3. The auditor may include in the confirmation request the details of the transactions, such as
customer's purchase order numbers to improve the response rate;

4. The confirmation request should be mailed in envelopes bearing the CPA firm's return address to
ensure that all confirmation requests that are undeliverable by the post office are returned directly to
the audit firm;

5. Receipt of reply to confirmation request should be under the control of the auditor; and

6. Retain copies of all confirmations in the working papers

7. one way to show more favorable financial position and (termed as window dressing) is to inflate sales
performance and cash by holding open the sales journal and cash journal beyond the reporting date

11. analytical procedures to identify peaks in sales volume in the last few days or weeks of the year and
test cutoff by inspecting sales register, billings, shipping documents and other supporting documents
before and after the year end date
12. foreign currency transaction gain or loss should be reported as part of profit or loss.

1. Which of the following is not normally considered an act of concealing cash shortage?

a. Lapping

b. Banking

c. Window dressing

d. Kiting

2. This occurs when collection of receivable from one customer is misappropriated and then concealed
by applying a subsequent collection from another customer.

a. Lapping

b. Window dressing

c. Kiting

d. Floating

3. This occurs when cash shortage is concealed by overstating the balance of cash. This is performed by
exploiting the float period (the time it needs for a check to clear at the bank it was drawn).

a. Lapping

c. Kiting

b. Window dressing

d. Floating

4. The general cash account is considered a significant account in almost all audits

A) where the ending balance is material.

B) even when the ending balance is immaterial.

C) except those of not-for-profit organizations.

D) where either the beginning or ending balance is material.

a. Time-out

c. Substitution

b. Defalcation

d. Misappropriation

6. A cash shortage may be concealed by transporting funds from one location to another or by
converting negotiable assets to cash. Because of this, which of the following is vital? a.Simultaneous
confirmations.

b.Simultaneous bank reconciliations

c.Simultaneous verification.

d.Simultaneous surprise cash count

7. The primary purpose of sending a standard bank confirmation request to financial institutions with
which the client has done business during the year is to;

a.Request information concerning contingent liabilities & collateral

b.Detect kiting activities that may otherwise not be discovered

c.Provide the data needed to prepare the bank section of a four-column proof of cash.
d.Corroborate/verify information regarding cash & loan balances.

8. As one of the year-end audit procedures, the auditor instructed the client's personnel to prepare a
standard bank confirmation request for a bank account that had been closed during the year. After the
client's treasurer had signed the request, it was mailed by the assistant treasurer. What is the major flaw
in this audit procedure?

a. The confirmation request was signed by the treasurer.

b. Sending the request was meaningless because the account was closed before the year-end.

C. The request was mailed by the assistant treasurer.

d. The CPA did not sign the confirmation request before it was mailed.
9. In October, three months before year-end, the bookkeeper erroneously recorded the receipt of a one
year bank loan with a debit to cash and a credit to miscellaneous revenue. Select the most effective
method for detecting this type of error.

a. Foot the cash receipts journal for October.

b. Send a bank confirmation as of year-end.

c. Prepare bank reconciliation as of year-end.

d. Prepare a bank transfer schedule as of year-end.

10. Which of the following is not confirmed on the standard form used for cash balances at financial
institutions?

a. Cash checking account balances.

b. Cash savings account balance

C. Loans payable.

d. Securities held for the client by the financial institution.

i 11. The primary assertion being addressed by sending bank confirmation

a. Existence

c. Rights and obligation

b. Completeness

d. Classification

12. Which of the following assertions is least likely to be addressed by sendi bank confirmation?

a. Existence

c. Rights and obligation

b. Completeness
d. Classification

13. This document is a bank statement prepared a few days after month-e Its purpose is to help auditors
verify reconciling items on the year-end bank reconciliation.

a. Cut-off bank statement

c. Bank transfer schedule

b. Bank reconciliation

d. Proof of cash

14. An auditor who is engaged to examine the financial statements of a busines enterprise will request a
cutoff bank statement primarily in order to

a. Verify the cash balance reported on the bank confirmation inquiry form.

b. Verify reconciling items on the client's bank reconciliation.

c. Detect lapping.

d. Detect kiting.

15. The auditors use a bank cutoff statement to compare:

a. Deposits in transit on the year-end cash general ledger account to deposits in the cash receipts
journal.

b. Checks dated prior to year-end to the outstanding checks listed on the year-end bank reconciliation.

C. Deposits listed on the cutoff statement to disbursements in the cash disbursements journal.

d. Checks dated subsequent to year-end to the outstanding checks listed on the year-end bank
statement.

16. Which procedure is an auditor most likely to use to detect a check outstanding at year-end that was
not recorded as outstanding on the year- end bank reconciliation?
a. Prepare a bank transfer schedule using the client's cash receipts an cash disbursements journal.

b. Receive a cutoff statement directly from the client's bank.

c. Prepare a four column bank reconciliation using the year-end bankstatement.

d. Confirm the year-end balance using the standard form to confir account balance information with
financial institutions.

17. A reconciliation that includes proof of receipts and disbursements that is useful in discovering
possible discrepancies in handling cash over a certain period of time.

a. Bank statement

c. Proof of cash

b. Bank reconciliation

d. Cash requirements report

18. Proof of cash or four-column-bank reconciliation is normally prepared by

a. The auditor

c. Either the client or auditor

b. The client

d. Neither client or auditor

19. The following specific scenarios are normally uncovered using proof of cash. Select the exception:

a. Cash receipts and disbursements recorded in the accounting records, but not on the bank statement.

b. Cash deposits and disbursements recorded on the bank statement, but not on the accounting records.
C. Cash receipts and disbursements not recorded in the accounting records and on the bank statement.

d. Cash receipts and disbursement recorded at different amounts by the bank than in the accounting
records.

20. By preparing a four-column bank reconciliation (proof of cash) at year-end, an auditor will generally
be able to detect:

a. An unrecorded deposit made at the bank at the end of the month.

b. A second payment of an account payable which had already been paid in full two months earlier.

c. An embezzlement of cash receipts not recorded in the cash receipts journal before they had been
deposited into the bank.

d. A receivable collected that had previously been written off as uncollectible.