AP_Audit of Cash (1)
4
Auditing Problems: Audit of Cash and Cash Equivalents Page 1 of 4 JTT061588 In connection with your audit of Caloocan Corporation for the year ended December 31, 2010, you gathered the following: Current account at Metrobank P2,000,000 Current account at BPI (100,000) Payroll account 500,000 Foreign bank account – restricted (in equivalent pesos) 1,000,000 Postage stamps 1,000 Employee’s post dated check 4,000 IOU from controller’s sister 10,000 Credit memo from a vendor for a purchase return 20,000 Traveler’s check 50,000 Not-sufficient-funds check 15,000 Money Order 30,000 Petty cash fund (P4,000 in currency and expense receipts for P6,000) 10,000 Treasury bills, due 3/30/11 (purchased 12/29/10) 200,000 Treasury bills, due 1/31/11 (purchased 2/1/10) 300,000 1. Based on the above information and the result of your audit, compute for the cash and cash equivalents that will be reported on the December 31, 2010 statement of financial position. a. P2,784,000 c. P2,790,000 b. P3,084,000 d. P2,704,000 The information below was taken form the bank transfer schedule prepared during the audit of Khaye Ting Company’s financial statements for the year ended December 31, 2010. Assume all checks are dated and issued on December 30, 2010. Disbursements Reciepts Per Per Per Per No. From To Books Bank Books Bank 101 Pbcom HSBC 12/30 1/4 12/30 1/3 102 UCPB Mbank 1/3 1/2 12/30 12/31 103 HSBC PSBank 12/31 1/3 1/2 1/2 104 MBank PNB 1/2 1/2 1/2 12/31 2. Which of the following checks might indicate kiting? a. Checks Nos. 101 and 103 b. Checks Nos. 102 and 104 c. Checks Nos. 101 and 104 d. Checks Nos. 102 and 103 3. Which of the following checks illustrate deposits/transfer in transit at December 31, 2010? a. Checks Nos. 101 and 102 b. Checks Nos. 101 and 103 c. Checks Nos. 102 and 104 d. Checks Nos. 103 and 104 4. Two months before year-end, the bookkeeper erroneously recorded the receipt of a long-term bank loan by a debit to cash and a credit to sales. Which of the following is the most effective procedure for detecting this type of error? a. Analyze bank confirmation information b. Analyze the notes payable journal. c. Prepare year-end bank reconciliation. d. Prepare a year-end bank transfer schedule. 5. Postdated checks received by mail in settlement of customer’s accounts should be a. Returned to customer. b. Stamped with restrictive endorsement. c. Deposited immediately by the cashier.
-
Upload
rose-castillo -
Category
Documents
-
view
64 -
download
2
description
Audit
Transcript of AP_Audit of Cash (1)
Auditing Problems: Audit of Cash and Cash Equivalents
Page 1 of 4 JTT061588
In connection with your audit of Caloocan Corporation for the year ended December 31, 2010,
you gathered the following:
Current account at Metrobank P2,000,000
Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account – restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money Order 30,000
Petty cash fund (P4,000 in currency and expense
receipts for P6,000) 10,000
Treasury bills, due 3/30/11 (purchased 12/29/10) 200,000
Treasury bills, due 1/31/11 (purchased 2/1/10) 300,000
1. Based on the above information and the result of your audit, compute for the cash and cash
equivalents that will be reported on the December 31, 2010 statement of financial position.
a. P2,784,000 c. P2,790,000
b. P3,084,000 d. P2,704,000
The information below was taken form the bank transfer schedule prepared during the audit of
Khaye Ting Company’s financial statements for the year ended December 31, 2010. Assume all
checks are dated and issued on December 30, 2010.
Disbursements Reciepts
Per Per Per Per
No. From To Books Bank Books Bank
101 Pbcom HSBC 12/30 1/4 12/30 1/3
102 UCPB Mbank 1/3 1/2 12/30 12/31
103 HSBC PSBank 12/31 1/3 1/2 1/2
104 MBank PNB 1/2 1/2 1/2 12/31
2. Which of the following checks might indicate kiting?
a. Checks Nos. 101 and 103
b. Checks Nos. 102 and 104
c. Checks Nos. 101 and 104
d. Checks Nos. 102 and 103
3. Which of the following checks illustrate deposits/transfer in transit at December 31, 2010?
a. Checks Nos. 101 and 102
b. Checks Nos. 101 and 103
c. Checks Nos. 102 and 104
d. Checks Nos. 103 and 104
4. Two months before year-end, the bookkeeper erroneously recorded the receipt of a long-term
bank loan by a debit to cash and a credit to sales. Which of the following is the most effective
procedure for detecting this type of error?
a. Analyze bank confirmation information
b. Analyze the notes payable journal.
c. Prepare year-end bank reconciliation.
d. Prepare a year-end bank transfer schedule.
5. Postdated checks received by mail in settlement of customer’s accounts should be
a. Returned to customer.
b. Stamped with restrictive endorsement.
c. Deposited immediately by the cashier.
Auditing Problems: Audit of Cash and Cash Equivalents
Page 2 of 4 JTT061588
d. Deposited the day after together with cash receipts.
6. The cashier of Weakness Company covered a shortage in the cash working fund with cash
obtain at December 31 from a bank by cashing but not recording a check drawn on the
company out of town bank. How would you as an auditor discover the manipulation?
a. By confirming all December 31 bank balances.
b. By counting the cash working fund at the close of business on December 31.
c. By investigating items returned with the bank cut-off statements of the succeeding
month.
d. By preparing independent bank reconciliations as of December 31.
7. An essential phase of the audit of the cash balance at the end of the year is the auditor’s review
of cutoff bank statement. This specific procedure is not useful in determining if
a. Kiting has occurred.
b. Lapping has occurred.
c. The cash receipts journal was held open.
d. Compare the daily cash receipts totals with the bank deposit
8. Which of the following sets of information does an auditor usually confirm on one form?
a. Cash in bank and collateral for loans.
b. Accounts payable and purchase commitments.
c. Accounts receivable and accrued interest receivable.
d. Inventory on consignment and contingent liabilities.
9. The primary purpose of sending a standard confirmation request to financial institutions with
which the client has done business during the year is to.
a. Corroborate information regarding deposit and loan balances.
b. Provide the data necessary to prepare a proof of cash.
c. Detect kiting activities that may otherwise not be discovered.
d. Request information about contingent liabilities and secured transactions.
10. An auditor ordinarily sends a standard confirmation request to all banks with which the
client has done business during the year under audit, regardless of the year-end balance. A
purpose of this procedure is to
a. Request a cutoff bank statement and related checks be sent to the auditor.
b. Detect kiting activities that may otherwise not be discovered.
c. Seek information about contingent liabilities and security agreements.
d. Provide the data necessary to prepare a proof of cash.
11. 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 CPA did not sign the confirmation request before it was mailed.
b. Sending the request was meaningless because the account was closed before year-end.
c. The confirmation request was signed by the treasurer.
d. The request was mailed by the assistant treasurer.
Cash in bank balance of Novaliches Co. on January 1, 2010 was P1,400,000 representing 35%
paid-up capital of its authorized share capital of P4,000,000. During the year you ascertained the
following postings to some accounts, as follows:
Debit Credit
Petty cash fund P 40,000
Accounts receivable trade 9,000,000 P5,800,000
Subscription receivable 1,200,000 1,000,000
Delivery equipment 1,000,000
Accounts payable trade 5,600,000 8,600,000
Bank loan 700,000 1,600,000
Accrued expenses 30,000
Subscribed share capital 1,200,000
Unissued share capital 2,600,000
Auditing Problems: Audit of Cash and Cash Equivalents
Page 3 of 4 JTT061588
Authorized share capital 4,000,000
Sales 9,000,000
Purchases 8,600,000
Expenses (including depreciation of
P100,000 and accrued expenses of
P30,000) 1,800,000
12. The cash in bank balance at December 31, 2010 is
a. P830,000 c. P690,000
b. P660,000 d. P790,000
Quezon Metals Company
Condensed Comparative Income Statements
For the Years Ended December 31, 2010 and 2009
2010 2009
Net Sales P14,244,000 P13,016,000
Cost of Goods Sold 11,156,000 10,272,000
Gross Profit 3,088,000 2,744,000
Expenses 2,084,000 1,944,000
Net Income P 1,004,000 P 800,000
Additional information for Quezon:
(a) All accounts receivable and accounts payable relate to trade merchandise.
(b) The proceeds from the notes payable were used to finance plant expansion.
(c) Share capital was sold to provide additional working capital.
Based on the above and the result of your audit, compute the following for 2010:
13. Cash collected from accounts receivable, assuming all sales are on account.
a. P14,012,000 c. P14,476,000
b. P 796,000 d. P16,508,000
14. Cash payments made on accounts payable to suppliers, assuming that all purchases of
inventory are on account.
a. P11,368,000 c. P10,944,000
b. P11,212,000 d. P11,256,000
15. Cash Payments for dividends.
a. P 828,000 c. P 668,000
b. P1,020,000 d. P1,180,000
16. Cash receipts that were not provided by operations.
a. P192,000 c. P700,000
b. P500,000 d. P 0
17. Cash payments for assets that were not reflected in operations.
a. P1,412,000 c. P 508,000
b. P 744,000 d. P1,176,000
Shown below is the bank reconciliation for Marikina Company for November 2010:
Balance per bank , Nov. 30, 2010 P150,000
Add: Deposits in transit 24,000
Total 174,000
Less: Outstanding checks P28,000
Bank credit recorded in error 10,000 38,000
Cash balance per books, Nov. 30, 2010 P136,000
The bank statement for December 2010 contains the following data:
Auditing Problems: Audit of Cash and Cash Equivalents
Page 4 of 4 JTT061588
Total deposits P110,000
Total charges, including an NSF check of P8,000
and a service charge of P400 96,000
All outstanding checks on November 30, 2010, including the bank credit, were cleared in the
bank in December 2010.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December 31,
2010.
Based on the above and the result of your audit, answer the following:
18. How much is the cash balance per bank on December 31, 2010?
a. P154,000 c. P164,000
b. P150,000 d. P172,400
19. How much is the December receipts per books?
a. P124,000 c. P110,000
c. P 96,000 d. P148,000
20. How much is the December disbursements per books?
a. P96,000 c. P89,600
b. P79,600 d. P98,000
21. How much is the cash balance per books on December 31, 2010?
a. P150,000 c. P180,400
b. P170,400 d. P162,000
22. The adjusted cash in bank balance as of December 31, 2010
a. P141,600 c. P172,000
b. P162,000 d. P196,000
