Question 1

Which of the following is not an example of management's policies and procedures over the preparation of accounting estimates?

Accepted Answer

A) Accumulation of relevant, sufficient, and reliable data. 
B) Preparation of estimates by qualified personnel. 
C) Review by the independent auditor. 
D) Consideration by management of whether the accounting estimates are consistent with the company's operational plans. 
A) Accumulation of relevant, sufficient, and reliable data. 
B) Preparation of estimates by qualified personnel. 
C) Review by the independent auditor. 
D) Consideration by management of whether the accounting estimates are consistent with the company's operational plans.

Question 2

Debt covenant violations have a significant impact on a company since they can affect

Accepted Answer

A) The ability of the entity to function as a going concern. 
B) Overall liability relationships in the financial statements. 
C) The nature of disclosures required in the audit report. 
D) How loan agreements should be structured. 
A) The ability of the entity to function as a going concern. 
B) Overall liability relationships in the financial statements. 
C) The nature of disclosures required in the audit report. 
D) How loan agreements should be structured.

Question 3

What is a compensating control? Describe a compensating control in the finance and investment cycle.

Accepted Answer

A compensating control is an alternative

Question 4

If an auditor decided to confirm share capital, the auditor would obtain the confirmation from

Accepted Answer

A) Management. 
B) The board of directors. 
C) Stockholders. 
D) An independent registrar. 
A) Management. 
B) The board of directors. 
C) Stockholders. 
D) An independent registrar.

Question 5

A typical activity performed in the finance and investment cycle would be:

Accepted Answer

A) Analysis of excess cash funds. 
B) Reconciliation of cash balances. 
C) Authorization of cash disbursements. 
D) Preparation of the cash flow statement. 
A) Analysis of excess cash funds. 
B) Reconciliation of cash balances. 
C) Authorization of cash disbursements. 
D) Preparation of the cash flow statement.

Question 6

Who is responsible for making accounting estimates?

Accepted Answer

A) Auditors 
B) Management 
C) Boards of Directors 
D) Shareholders 
A) Auditors 
B) Management 
C) Boards of Directors 
D) Shareholders

Question 7

The decision of a company to have a transfer agent handle the exchange of shares is related primarily to which functional responsibility?

Accepted Answer

A) Authorization. 
B) Custody. 
C) Recordkeeping. 
D) Periodic reconciliation. 
A) Authorization. 
B) Custody. 
C) Recordkeeping. 
D) Periodic reconciliation.

Question 8

Which management assertion is of most importance to auditors in examining long-term debt?

Accepted Answer

A) Existence. 
B) Completeness. 
C) Rights and obligations. 
D) Presentation and disclosure. 
A) Existence. 
B) Completeness. 
C) Rights and obligations. 
D) Presentation and disclosure.

Question 9

Which of the following management assertions for long-term liabilities is related to completeness?

Accepted Answer

A) All material long-term liabilities are recorded. 
B) Assumption of new long-term liabilities and repayment of debt are properly authorized. 
C) Terms, conditions, and restrictions relating to long-term debt are adequately disclosed. 
D) Disclosure of five-year repayment schedule and debt maturity dates is accurate and adequate. 
A) All material long-term liabilities are recorded. 
B) Assumption of new long-term liabilities and repayment of debt are properly authorized. 
C) Terms, conditions, and restrictions relating to long-term debt are adequately disclosed. 
D) Disclosure of five-year repayment schedule and debt maturity dates is accurate and adequate.

Question 10

The auditor selected a sample of journal entries related to notes payable and traced interest expense to the general ledger.The auditor is testing controls over accuracy.

Accepted Answer

A) True 
 B)False

Question 11

The purchase of fixed assets is part of the finance and investment cycle.

Accepted Answer

A) True 
 B)False

Question 12

The most appropriate control to prevent improper use of share or bond instruments is

Accepted Answer

A) Authorization to purchase shares by a senior financial officer. 
B) Use of a registered broker to purchase and sell all shares. 
C) Proper custodial control of securities. 
D) Registration of bond instruments with the exchange authorities. 
A) Authorization to purchase shares by a senior financial officer. 
B) Use of a registered broker to purchase and sell all shares. 
C) Proper custodial control of securities. 
D) Registration of bond instruments with the exchange authorities.

Question 13

Confirmation requests should be sent to lenders only if there is a balance owing to the lender at the confirmation date.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a substantive procedure in the audit of estimates made by management?

Accepted Answer

A) Observing whether estimates are prepared by qualified personnel. 
B) Recalculating the mathematical estimate. 
C) Scanning for evidence of review by senior management. 
D) Ensuring estimates are recorded in the right accounts. 
A) Observing whether estimates are prepared by qualified personnel. 
B) Recalculating the mathematical estimate. 
C) Scanning for evidence of review by senior management. 
D) Ensuring estimates are recorded in the right accounts.

Question 15

The sale of share capital and the decision to finance the company with debt are transactions usually authorized by shareholders.

Accepted Answer

A) True 
 B)False

Which of the following is not an example of management's policies and procedures over the preparation of accounting estimates?

Debt covenant violations have a significant impact on a company since they can affect

What is a compensating control? Describe a compensating control in the finance and investment cycle.

If an auditor decided to confirm share capital, the auditor would obtain the confirmation from

A typical activity performed in the finance and investment cycle would be:

Who is responsible for making accounting estimates?

The decision of a company to have a transfer agent handle the exchange of shares is related primarily to which functional responsibility?

Which management assertion is of most importance to auditors in examining long-term debt?

Which of the following management assertions for long-term liabilities is related to completeness?

The auditor selected a sample of journal entries related to notes payable and traced interest expense to the general ledger.The auditor is testing controls over accuracy.

The purchase of fixed assets is part of the finance and investment cycle.

The most appropriate control to prevent improper use of share or bond instruments is

Confirmation requests should be sent to lenders only if there is a balance owing to the lender at the confirmation date.

Which of the following is a substantive procedure in the audit of estimates made by management?

The sale of share capital and the decision to finance the company with debt are transactions usually authorized by shareholders.

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

Exam 14: Finance and Investment Process

Which of the following is not an example of management's policies and procedures over the preparation of accounting estimates?

Debt covenant violations have a significant impact on a company since they can affect

What is a compensating control? Describe a compensating control in the finance and investment cycle.

If an auditor decided to confirm share capital, the auditor would obtain the confirmation from

A typical activity performed in the finance and investment cycle would be:

Who is responsible for making accounting estimates?

The decision of a company to have a transfer agent handle the exchange of shares is related primarily to which functional responsibility?

Which management assertion is of most importance to auditors in examining long-term debt?

Which of the following management assertions for long-term liabilities is related to completeness?

The auditor selected a sample of journal entries related to notes payable and traced interest expense to the general ledger.The auditor is testing controls over accuracy.

The purchase of fixed assets is part of the finance and investment cycle.

The most appropriate control to prevent improper use of share or bond instruments is

Confirmation requests should be sent to lenders only if there is a balance owing to the lender at the confirmation date.

Which of the following is a substantive procedure in the audit of estimates made by management?

The sale of share capital and the decision to finance the company with debt are transactions usually authorized by shareholders.

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