TRUE-FALSE QUESTIONS

1. If the auditor observes that the company reports consistent profits over several years while cash flows are decreasing, then the auditor should assess heightened risk of fraud in cash.

2. The relative percentage of substantive analytics that will be used by the auditor as evidence in the audit of cash will be somewhat limited regardless of the riskiness of the client.

3. When auditing cash, the auditor will perform a relatively larger percentage of tests of details for a high-risk client compared to a low-risk client.

4. An example of a monitoring control in cash would include a daily review of cash budgets and a comparison of them with actual cash balances, with appropriate follow-up.

5. If monitoring controls are effective, then the auditor will be required to perform a walkthrough of the processing of cash collections, starting with their receipt through the preparation of documents for processing.

6. Because cash balances are usually relatively low at year end, auditing standards encourage auditors to send bank confirmations on a sample basis.

7. A normal bank statement prepared at an interim agreed upon date that is sent directly to the auditor is called a bank transfer statement.

8. The major judgmental challenges that auditors face in auditing marketable securities include corroborating management's intent in classifying these assets into the proper categories and determining fair market value.

9. An appropriate audit procedure to test the valuation assertion for marketable securities involves reviewing the client's schedule of marketable securities and confirming with trustees that those securities do, indeed, belong to the company.