Question 1

Accounting estimates include which of the following:

Accepted Answer

A) Trade payable balances 
B) Cash balances 
C) Capital Assets at cost 
D) Amortization expense 
A) Trade payable balances 
B) Cash balances 
C) Capital Assets at cost 
D) Amortization expense D

Question 2

In the area of finance and investment, the involvement of two or more persons in each important functional responsibility could be considered a compensating control.

Accepted Answer

A) True 
 B)False  True

Question 3

Auditors should expect to find the authorizing signatures of the CEO, CFO, chair of the board of directors, and perhaps other high-ranking officers on financing documents.

Accepted Answer

A) True 
 B)False  True

Question 4

What is a compensating control as it relates to the finance and investment function?

Accepted Answer

A compensating control is a control feat

Question 5

It is very common for auditors to perform substantive procedures on 100 percent of the transactions and general ledger balances for investment accounts and loan accounts.

Accepted Answer

A) True 
 B)False

Question 6

If the auditor suspects that the financial statements are intentionally misstated, he or she should perform procedures to confirm or dispel that suspicion.

Accepted Answer

A) True 
 B)False

Question 7

This internal control questionnaire item "Are interest payments and accruals monitored for due dates?" relates to the control objective of:

Accepted Answer

A) Validity. 
B) Completeness. 
C) Accounting. 
D) Proper period recording. 
A) Validity. 
B) Completeness. 
C) Accounting. 
D) Proper period recording.

Question 8

Selecting a sample of paid notes and tracing interest costs to the general ledger expense account is a test of the control objective of

Accepted Answer

A) Accounting. 
B) Accuracy. 
C) Completeness. 
D) Validity. 
A) Accounting. 
B) Accuracy. 
C) Completeness. 
D) Validity.

Question 9

The inherent risk associated with the finance and investment cycle is less than that associated with other cycles, especially given the low number of transactions typically involved.

Accepted Answer

A) True 
 B)False

Question 10

Transactions in debt and shareholder equity are typically handled by:

Accepted Answer

A) Payroll 
B) Accounting Staff 
C) Accounting Supervisors 
D) Upper Management 
A) Payroll 
B) Accounting Staff 
C) Accounting Supervisors 
D) Upper Management

Question 11

Discuss the custody of investments and intangible assets.

Accepted Answer

Custody of investments and intangible as

Question 12

The auditor's primary concern in the verification of long-term liabilities is that all liabilities are recorded and that the interest expense is properly paid or accrued.

Accepted Answer

A) True 
 B)False

Question 13

Management's statement that a marketable security is a long-term investment may be the only evidence available to support classifying the investment as a non-current asset.

Accepted Answer

A) True 
 B)False

Question 14

It is easier to segregate functional responsibilities in middle management than in upper- level management.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following questions is an auditor most likely to include on an internal control questionnaire?

Accepted Answer

A) Are the assets that secure notes payable critically needed for the entity's continued existence? 
B) Are two or more authorized signatures required on cheques that repay notes payable? 
C) Are the proceeds from notes payable used for the purchase of non-current assets? 
D) Are direct borrowings on notes payable authorized by the board of directors? 
A) Are the assets that secure notes payable critically needed for the entity's continued existence? 
B) Are two or more authorized signatures required on cheques that repay notes payable? 
C) Are the proceeds from notes payable used for the purchase of non-current assets? 
D) Are direct borrowings on notes payable authorized by the board of directors?

Question 16

Letters of credit are an example of "off-balance-sheet" financing.

Accepted Answer

A) True 
 B)False

Question 17

The auditor's tests of controls over the appropriateness of accounting estimates consist primarily of enquiry and observation.

Accepted Answer

A) True 
 B)False

Question 18

Off balance sheet means that:

Accepted Answer

A) Obligations and commitments are recorded only in the income statement accounts. 
B) Obligations and commitments are recorded only in the statement of cash flows. 
C) Capital budgets are properly authorized and approved. 
D) Obligations and commitments are not recorded in the accounts of the company. 
A) Obligations and commitments are recorded only in the income statement accounts. 
B) Obligations and commitments are recorded only in the statement of cash flows. 
C) Capital budgets are properly authorized and approved. 
D) Obligations and commitments are not recorded in the accounts of the company.

Question 19

In the finance and investment cycle, which of the following controls would be most effective in ensuring that proper custody of assets has been maintained?

Accepted Answer

A) Direct access to securities in the safety deposit box is limited to only one corporate officer. 
B) Personnel who post investment transactions to the general ledger are not permitted to update the investment subsidiary ledger. 
C) The purchase and sale of investments are executed on the specific authorization of the board of directors. 
D) The recorded balances in the investment subsidiary ledger are periodically compared with the contents of the safety deposit box by independent personnel. 
A) Direct access to securities in the safety deposit box is limited to only one corporate officer. 
B) Personnel who post investment transactions to the general ledger are not permitted to update the investment subsidiary ledger. 
C) The purchase and sale of investments are executed on the specific authorization of the board of directors. 
D) The recorded balances in the investment subsidiary ledger are periodically compared with the contents of the safety deposit box by independent personnel.

Question 20

In Cassette 14.3, Verity Distillery used the product repurchase ploy to

Accepted Answer

A) Overstate assets and understate liabilities by borrowing money and not recording the liability. 
B) Increase owners' equity by recording the sale of inventory without recording any cost of goods sold. 
C) Understate assets and understate liabilities by borrowing money through an undisclosed related party transaction and disguising it as a sale. 
D) Understate assets and understate liabilities by loaning money to its officers. 
A) Overstate assets and understate liabilities by borrowing money and not recording the liability. 
B) Increase owners' equity by recording the sale of inventory without recording any cost of goods sold. 
C) Understate assets and understate liabilities by borrowing money through an undisclosed related party transaction and disguising it as a sale. 
D) Understate assets and understate liabilities by loaning money to its officers.

Accounting estimates include which of the following:

In the area of finance and investment, the involvement of two or more persons in each important functional responsibility could be considered a compensating control.

Auditors should expect to find the authorizing signatures of the CEO, CFO, chair of the board of directors, and perhaps other high-ranking officers on financing documents.

What is a compensating control as it relates to the finance and investment function?

It is very common for auditors to perform substantive procedures on 100 percent of the transactions and general ledger balances for investment accounts and loan accounts.

If the auditor suspects that the financial statements are intentionally misstated, he or she should perform procedures to confirm or dispel that suspicion.

This internal control questionnaire item "Are interest payments and accruals monitored for due dates?" relates to the control objective of:

Selecting a sample of paid notes and tracing interest costs to the general ledger expense account is a test of the control objective of

The inherent risk associated with the finance and investment cycle is less than that associated with other cycles, especially given the low number of transactions typically involved.

Transactions in debt and shareholder equity are typically handled by:

Discuss the custody of investments and intangible assets.

The auditor's primary concern in the verification of long-term liabilities is that all liabilities are recorded and that the interest expense is properly paid or accrued.

Management's statement that a marketable security is a long-term investment may be the only evidence available to support classifying the investment as a non-current asset.

It is easier to segregate functional responsibilities in middle management than in upper- level management.

Which of the following questions is an auditor most likely to include on an internal control questionnaire?

Letters of credit are an example of "off-balance-sheet" financing.

The auditor's tests of controls over the appropriateness of accounting estimates consist primarily of enquiry and observation.

Off balance sheet means that:

In the finance and investment cycle, which of the following controls would be most effective in ensuring that proper custody of assets has been maintained?

In Cassette 14.3, Verity Distillery used the product repurchase ploy to

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

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Exam 14: Finance and Investment Process

Accounting estimates include which of the following:

In the area of finance and investment, the involvement of two or more persons in each important functional responsibility could be considered a compensating control.

Auditors should expect to find the authorizing signatures of the CEO, CFO, chair of the board of directors, and perhaps other high-ranking officers on financing documents.

What is a compensating control as it relates to the finance and investment function?

It is very common for auditors to perform substantive procedures on 100 percent of the transactions and general ledger balances for investment accounts and loan accounts.

If the auditor suspects that the financial statements are intentionally misstated, he or she should perform procedures to confirm or dispel that suspicion.

This internal control questionnaire item "Are interest payments and accruals monitored for due dates?" relates to the control objective of:

Selecting a sample of paid notes and tracing interest costs to the general ledger expense account is a test of the control objective of

The inherent risk associated with the finance and investment cycle is less than that associated with other cycles, especially given the low number of transactions typically involved.

Transactions in debt and shareholder equity are typically handled by:

Discuss the custody of investments and intangible assets.

The auditor's primary concern in the verification of long-term liabilities is that all liabilities are recorded and that the interest expense is properly paid or accrued.

Management's statement that a marketable security is a long-term investment may be the only evidence available to support classifying the investment as a non-current asset.

It is easier to segregate functional responsibilities in middle management than in upper- level management.

Which of the following questions is an auditor most likely to include on an internal control questionnaire?

Letters of credit are an example of "off-balance-sheet" financing.

The auditor's tests of controls over the appropriateness of accounting estimates consist primarily of enquiry and observation.

Off balance sheet means that:

In the finance and investment cycle, which of the following controls would be most effective in ensuring that proper custody of assets has been maintained?

In Cassette 14.3, Verity Distillery used the product repurchase ploy to

Introduction to Auditing

Audit, Assurance, and Quality Control Standards

Reports on Audited Financial Statements and Audited Internal Controlt

Professional Ethics and Auditor Responsibilities

Legal Liability

Preliminary Audit Planning: Understanding the Auditee

Assessing Risks and Internal Control

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

Revenues, Receivables, and Receipts Process

Purchases, Payables, and Payments Processtrue

Production and Payroll Process

Completing the Audit

Other Public Accounting Services and Reports

Fraud Awareness Auditing

Filters