Exam 16: Audit of the Capital Acquisition and Repayment Cycle

The tests of details of balances procedure that requires the auditor to examine corporate minutes for loan approval would satisfy the audit objective of

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Question 1

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State the four audit concerns for capital stock and describe how the auditor typically verifies each of these areas.

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Question 2

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Verified

The four most important audit objectives for capital stock are:
1.Existing share capital transactions are recorded (completeness).If a registrar or transfer agent is used,the auditor confirms balances and transactions with them.
The auditor may also review minutes of board of directors' meetings and examine client-held share records.
2.Recorded share capital transactions exist and are accurately recorded (occurrence and accuracy).All share capital transactions are verified (e.g. ,due to mergers,issuance,or repurchase)by looking for authorizations in the minutes of board of directors' meetings and agreements with share transfer agent records (using confirmations or physical inspection at their offices).Changes due to mergers and acquisitions will require inspection of relevant legal documents and may require auditor specialist assistance on the audit team.
3.Share capital is accurately recorded (accuracy).Confirmation with the share transfer agent will provide balances and details.If the auditor inspects share records,then the auditor would verify mechanical accuracy of the records,check that certificates (if used)are properly cancelled,and determine that complex types of capital (such as convertible securities)have been properly figured into the calculations.
4.Share capital is fully presented and clearly disclosed (completeness and understandability).
Based upon review of the prior audit working paper file,articles of incorporation and minutes of director' meetings,the auditor evaluates the completeness and quality of disclosure.Items to consider are type of capital,terms,amounts,dividend declaration dates,and similar matters.

An audit procedure that is part of the audit of notes payable is the review of the permanent audit working paper files to determine if there are restrictions on the payment of dividends in bond indenture agreements or preferred share provisions.Which presentation and disclosure audit assertion is this associated with?

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Question 3

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Verified

When the auditor examines the minutes of board of directors' meetings for the amount of the dividend per share and the dividend date,the auditor is checking for

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Question 4

The test of details of balances procedure that requires the auditor to recalculate accrued interest will satisfy the audit objective of

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Question 5

During the course of an audit,a public accountant observes that the recorded interest expense seems to be excessive in relation to the balance in the long-term debt account.This observation could lead the auditor to suspect that

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Question 6

The normal starting point for the audit of notes payable is

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Question 7

First Global is a public company.You are currently performing the audit of the owners' equity section and you have been asked to write a short memo about the control weaknesses you have identified and the potential risk attached to each weakness. First Global has been a public company since March of the current year,when it underwent its IPO.The corporation has been implementing various controls with regards to keeping records of the company,but it is still a growing company.Sasha,the equity accountant,has been having a tough time learning all the new regulations,keeping the records up to date,and ensuring that the dividend payments are made on time. First Global issued two classes of shares in its IPO.Class A shares with 10 votes were issued to the Truman family so they could retain control of the company and Class B shares with 1 vote each were issued to the general public.When you reviewed the accounting records,you noticed that they contained only one account for capital stocks. What control weaknesses are evident at First Global and what are their implications?

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Question 8

Which accounts are relevant during the audit of notes payable?

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Question 9

Control risk for notes payable is usually assessed as low.This occurs because internal controls are normally good for notes payable and

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Question 10

The tests of details of balances procedure that requires the auditor to examine notes paid after year-end to determine whether they were liabilities at the balance sheet date is an attempt to satisfy the audit objective of

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Question 11

Usually dividends are audited

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Question 12

State the common test of details of balances for notes payables relating to the completeness assertion.

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Question 13

When the auditor examines the board of directors' minutes for dividends declared,the auditor should be alert to the possibility of unrecorded dividends declared,particularly shortly before the balance sheet date.Which audit assertion does this address?

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Question 14

The amount of time spent verifying owners' equity is frequently minimal for closely-held corporations because

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Question 15

Two of the audit objectives for notes payable are important because a misstatement could be material even if one note is omitted or incorrect.Which assertions are they?

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Question 16

It is normal practice to verify all capital stock transactions

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Question 17

The audit objective to determine that notes payable in the schedule exist is verified by the tests of balances procedure to

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Question 18

The audit objective to determine that notes payable and accrued interest on the notes payable schedule are accurate is accomplished by which of the following test of balances procedure?

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Question 19

Notes payable that have been repaid in full should be

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Question 20

Showing 1 - 20 of 73

The tests of details of balances procedure that requires the auditor to examine corporate minutes for loan approval would satisfy the audit objective of

State the four audit concerns for capital stock and describe how the auditor typically verifies each of these areas.

When the auditor examines the minutes of board of directors' meetings for the amount of the dividend per share and the dividend date,the auditor is checking for

The test of details of balances procedure that requires the auditor to recalculate accrued interest will satisfy the audit objective of

During the course of an audit,a public accountant observes that the recorded interest expense seems to be excessive in relation to the balance in the long-term debt account.This observation could lead the auditor to suspect that

The normal starting point for the audit of notes payable is

Which accounts are relevant during the audit of notes payable?

Control risk for notes payable is usually assessed as low.This occurs because internal controls are normally good for notes payable and

The tests of details of balances procedure that requires the auditor to examine notes paid after year-end to determine whether they were liabilities at the balance sheet date is an attempt to satisfy the audit objective of

Usually dividends are audited

State the common test of details of balances for notes payables relating to the completeness assertion.

When the auditor examines the board of directors' minutes for dividends declared,the auditor should be alert to the possibility of unrecorded dividends declared,particularly shortly before the balance sheet date.Which audit assertion does this address?

The amount of time spent verifying owners' equity is frequently minimal for closely-held corporations because

Two of the audit objectives for notes payable are important because a misstatement could be material even if one note is omitted or incorrect.Which assertions are they?

It is normal practice to verify all capital stock transactions

The audit objective to determine that notes payable in the schedule exist is verified by the tests of balances procedure to

The audit objective to determine that notes payable and accrued interest on the notes payable schedule are accurate is accomplished by which of the following test of balances procedure?

Notes payable that have been repaid in full should be

The Demand for Audit and Other Assurance Services

The Public Accounting Profession and Audit Quality

Professional Ethics and Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Client Acceptance,Planning,and Materiality

Assessing the Risk of Material Misstatement

Internal Control and COSO Framework

Assessing Control Risk and Designing Test of Controls

Develop Risk Response: Audit Strategy and Audit Program

Audit Sampling Concepts

Audit of the Revenue Cycle

Audit of the Acquisition and Payment Cycle

Audit of the Inventory and Distribution Cycle

Audit of the Human Resources and Payroll Cycle

Audit of Cash Balances

Completing the Audit

Audit Reports on Financial Statements

Other Assurance and Nonassurance Services

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