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1 In regard to cash audit and internal controls which of the following is false?
When internal control over the recording of cash is weak the auditor may prepare a proof of cash as a substantive test.
Sending a standard confirmation to financial institutions to verify amounts the client has on deposit is a form of substantive testing.
The consideration of materiality does not apply to the audit of cash.
The bank cutoff statement should be obtained for a period of time after the balance sheet date
2Which of the following is not considered a control over cash disbursements?
All disbursements are made by checks.
All checks are prenumbered and the sequence is accounted for.
After signing, signed checks are returned to the accounting department that prepared them for signature.
Blank checks are kept in a locked safe.
Expert Answer
1.
The following statement is false in regard to cash audit and internal controls:
The consideration of materiality does not apply to the audit of cash.
Consideration of materiality is applied to each and every item reported on the financial statements. If the misstatement is material detailed audit procedures are followed by the auditor. In fact the whole audit plan and all audit procedures are based on consideration of materiality.
2.
The following is not considered a control over cash disbursements:
After signing, signed checks are returned to the accounting department that prepared them for signature.
After signing the signed checks are not returned to the accounting department that prepared them for signature. The accounting department which prepares checks for payments is not authorised to sign them.
