03 Quiz 1
03 Quiz 1
QUIZ
I. MULTIPLE CHOICE
Select the best answer for each of the following. (5 items x 2 points)
1. An auditor for a large rice company is performing an audit of the company’s cash balance. The
auditor is considering the most appropriate audit procedure to use to ensure that the amount of cash is
accurately recorded on the company's financial statements. The most appropriate audit procedures for
the objective are:
a. Examine bank reconciliations, confirm bank balances, and verify cut off of- receipts and
disbursements; foot totals of reconciliations and compare to cash account balances.
b. Review collection procedures and perform an analytical review of accounts receivable; confirm
balances of accounts receivable and verify the existence of appropriate procedures and
facilities.
c. Compare cash receipt lists with the receipts journal and bank deposit slips; review the
segregation of duties, observe, and test cash receipts.
d. Review the organizational structure and functional responsibilities; verify the existence and
describe protection procedures for unused checks, including security measures.
2. While performing an audit of cash, an auditor begins to suspect check kiting. Which of the following
is the best evidence that the auditor could obtain concerning whether kiting is taking place?
a. Documentary evidence obtained by vouching credits on the latest bank statement to supporting
documents.
b. Documentary evidence obtained by vouching entries in the cash account to supporting
documents.
c. Oral evidence obtained by discussing with controller personnel.
d. Evidence obtained by preparing a schedule of interbank transfers.
3. If the balance shown on an entity’s bank statement is less than the correct cash balance and neither
the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity.
b. Outstanding checks.
c. Deposits in transit.
d. Bank charges not yet recorded by the entity.
4. When counting cash on hand, the auditor must exercise control over all cash and other negotiable
assets to prevent
a. Theft
b. Substitution
c. Irregular endorsement
d. Deposit in transit
5. The primary audit objective for cash is to establish that the balance is properly stated. This involves
determining:
a. b. c. d.
That cash on hand, as shown in the general ledger, is represented by
currency and coins on hand Yes Yes Yes Yes
Ownership and proper accountabilities No Yes No Yes
BM2008
A. In connection with your audit of the financial statements of EXO-SC COMPANY for the year
ended December 31, 2019, you gathered the following information.
The company maintains its current account with SM Bank. The bank statement on December 31,
2019 showed a balance of P638,340.
Your audit of the company's account with SM Bank disclosed the following:
A check for P22,500 received from a customer whose account is current had been deposited
and then returned by the bank on December 28, 2019. No entry was made for the return of
this check. The customer replaced the check on January 15, 2020.
A check for P5,720 was cleared by the bank as P7,520. The bank made the correction on
January 2, 2020.
A check for P3,500 representing payment of an employee advance was received and
deposited on December 27, 2019 but was not recorded until January 3, 2020.
Postdated checks totaling P67,300 were included in the deposits in transit. These represent
collections of current accounts receivable from customers. The checks were actually
deposited on January 5, 2020.
Various debit memos for drafts purchased for payment of importation of equipment totaling
P230,000 were not yet recorded. These purchases were previously set up as accounts
payable. Said equipment arrived in December 2019.
Interest earned on the bank balance for the 4th quarter of 2019, amounting to P1,950 was not
recorded.
Bank service charges totaling P1,260 were not recorded.
Deposit in transit and outstanding checks at December 31, 2019 totaled P136,250 and
P276,380, respectively.
Various expenses from the company’s imprest petty cash fund dated December 2019 totaled
P16,250, while those dated January 2020 amounted to P5,903. Another disbursement from the
fund dated December 2019 was a cash advance to an employee amounting to P3,500. A
replenishment of the petty cash fund was made on January 8, 2020
The company’s trial balance on December 31, 2019 includes the following accounts:
P30,000
Petty cash fund
9. The entry to adjust the Cash in bank - SM Bank account should include a debit to
a. Accounts receivable for P89,800.
b. Accounts receivable for P86,300.
c. Accounts payable for P228,200.
d. Interest expense for P1,950.
10. The December 31, 2019 statement of financial position should show “Cash and cash equivalents”
at
a. P6,142,960
b. P5,439,360
c. P4,442,960
d. P5,442,960
CASH
BOOKS
RECEIPTS PAYMENTS
Date OR No. Amount Check No. Amount
Dec. 1 110-120 P 33,000 801 P 6,000
2 121-136 63,900 802 9,000
3 137-150 60,000 803 3,000
4 151-165 168,000 804 9,000
5 166-190 117,000 805 36,000
8 191-210 198,000 806 57,000
9 211-232 264,000 807 78,000
10 233-250 231,000 808 90,000
11 251-275 63,000 809 183,000
12 276-300 90,000 810 21,000
15 301-309 165,000 811 24,000
16 310-350 24,000 812 48,000
17 351-390 57,000 813 60,000
18 391-420 27,000 814 66,000
19 421-480 51,000 816 108,000
22 481-500 63,000 817 33,000
23 501-525 96,000 818 150,000
23 - - 819 21,000
23 - - 820 12,000
26 526-555 222,000 821 9,000
28 556-611 15,000 822 36,000
28 - - 823 39,000
29 612-630 114,000 824 87,000
29 - - 825 6,000
29 - - 826 33,000
Totals P2,121,900 P1,224,000
BANK
STATEMENT
Additional information:
1. DMs 61 and 112 are for service charges.
2. EC is error corrected.
3. DM 57 is for an NSF check.
4. CM 20 is for loan proceeds, net of P450 interest charges for 90 days.
5. CM 16 is for the correction of an erroneous November bank charge.
6. CM 36 is for customers’ notes collected by bank in December.
7. Bank balance on December 31 is P1,776,810