For Which of the Following Internal Controls Would an Auditor

question 41

Multiple Choice

For which of the following internal controls would an auditor be least likely to perform tests of internal controls closer to the "as of" date?

• A)Withdrawals from Federal Bank of more than $5 million must include a manager's signature.
• B)At the end of each day at Federal Bank, the total cash in the vault is reconciled with daily registers of deposits and withdrawals.
• C)Federal Bank has just started establishing trusts for its customers and it has only set up ten such trusts. Before making an investment for a trust, bank employees must verify that the investment is in accordance with stated investment policies.
• D)On an annual basis, Federal Bank management performs credit checks on its loan customers before determining the value of loans it will not be able to collect on.

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Definitions:

Selling Expense

Costs incurred to sell a product, including advertising, sales commissions, and other expenses directly related to the sales process.

Administrative Expense

Costs associated with the general administration of a business, such as salaries of executive officers, legal fees, and office supplies.

Investing Activities

Activities related to buying and selling long-term assets and various investments, which appear in a firm's statement of cash flows.

Comparative Balance Sheet

A financial statement that presents the financial position of a company at two or more different points in time, allowing for trend analysis.