Question 1

Auditors count investment securities held by the client primarily to test the ASB balance assertion of:

Accepted Answer

A) existence. 
B) rights and obligations. 
C) completeness. 
D) valuation. 
A) existence. 
B) rights and obligations. 
C) completeness. 
D) valuation.

Question 2

Related party transactions:

Accepted Answer

A) must be valued as if they were arm's length. 
B) must be assumed to be valued differently than if they were arm's length. 
C) must be disclosed in the financial statements. 
D) must be disclosed in the financial statements and the auditor's report. 
A) must be valued as if they were arm's length. 
B) must be assumed to be valued differently than if they were arm's length. 
C) must be disclosed in the financial statements. 
D) must be disclosed in the financial statements and the auditor's report.

Question 3

The typical assertions related to investments and related accounts would not include the PCAOB assertion that:

Accepted Answer

A) capitalized intangible costs relate to intangibles acquired in exchange transactions. 
B) amortization is properly calculated. 
C) research and development costs are properly classified. 
D) goodwill is valued at market value. 
A) capitalized intangible costs relate to intangibles acquired in exchange transactions. 
B) amortization is properly calculated. 
C) research and development costs are properly classified. 
D) goodwill is valued at market value.

Question 4

When a company keeps its own stock records, which of the following procedures is not required?

Accepted Answer

A) Confirm outstanding common stock with stock registrar agent. 
B) Inspect the stock record stubs for certificate numbers and number of shares. 
C) Inspect the unissued certificates. 
D) Obtain written representation about the number of shares issued and outstanding. 
A) Confirm outstanding common stock with stock registrar agent. 
B) Inspect the stock record stubs for certificate numbers and number of shares. 
C) Inspect the unissued certificates. 
D) Obtain written representation about the number of shares issued and outstanding.

Question 5

One primary focus of substantive tests in the finance and investment cycle is on:

Accepted Answer

A) reconciliation of detailed listings with general ledger amounts. 
B) proper cut-off. 
C) search for unrecorded items. 
D) gaining an understanding and verifying amounts and calculations. 
A) reconciliation of detailed listings with general ledger amounts. 
B) proper cut-off. 
C) search for unrecorded items. 
D) gaining an understanding and verifying amounts and calculations.

Question 6

Match between columns
                        Premises: Verified the name on the account was the company's name.
Vouched items listed on the statement to the investment account.
Vouched purchases listed on the statement by authorization by senior management or the board of directors.
The auditor has received a letter of confirmation directly from the broker for investments listed on the statement.
The auditor compared the price of the securities listed on the broker's statement with the price listed on that day in The Wall Street Journal to the price used to record the investment on the balance sheet.

Accepted Answer

The Answer of Rights and obligations and Completeness and Valuation is...

Question 7

Which of the following questions would auditors most likely include on an internal control questionnaire for notes payable?

Accepted Answer

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

Question 8

Which of the following is not an approach an auditor may choose when performing substantive procedures to test accounting estimates?

Accepted Answer

A) Test the company's process used to develop the accounting estimate. 
B) Confirm the accounting estimate with a reliable third party expert. 
C) Develop an independent expectation for comparison to the company's estimate. 
D) Evaluate audit evidence from events or transactions occurring after the measurement date. 
A) Test the company's process used to develop the accounting estimate. 
B) Confirm the accounting estimate with a reliable third party expert. 
C) Develop an independent expectation for comparison to the company's estimate. 
D) Evaluate audit evidence from events or transactions occurring after the measurement date.

Question 9

Which of the following is not an off-balance-sheet item?

Accepted Answer

A) Purchase commitment 
B) Capitalized lease 
C) Loan commitment 
D) Synthetic lease 
A) Purchase commitment 
B) Capitalized lease 
C) Loan commitment 
D) Synthetic lease

Question 10

When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records, canceled stock certificates should:

Accepted Answer

A) be defaced to prevent reissuance and attached to their corresponding stubs. 
B) not be defaced but be segregated from other stock certificates and retained in a canceled certificates file. 
C) be destroyed to prevent fraudulent reissuance. 
D) be defaced and sent to the secretary of state. 
A) be defaced to prevent reissuance and attached to their corresponding stubs. 
B) not be defaced but be segregated from other stock certificates and retained in a canceled certificates file. 
C) be destroyed to prevent fraudulent reissuance. 
D) be defaced and sent to the secretary of state.

Question 11

All corporate capital stock transactions should ultimately be traced to the:

Accepted Answer

A) minutes of the meetings of the board of directors. 
B) cash receipts journal. 
C) cash disbursements journal. 
D) numbered stock certificates. 
A) minutes of the meetings of the board of directors. 
B) cash receipts journal. 
C) cash disbursements journal. 
D) numbered stock certificates.

Question 12

If it would be appropriate to confirm capital stock, 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 13

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

Accepted Answer

A) Rights and obligations 
B) Custody 
C) Record keeping 
D) Periodic reconciliation 
A) Rights and obligations 
B) Custody 
C) Record keeping 
D) Periodic reconciliation

Question 14

A transfer agent:

Accepted Answer

A) keeps the stockholder list and, from time to time, determines the shareholders eligible to receive dividends. 
B) handles the exchange of shares, canceling the shares surrendered by sellers and issuing new certificates. 
C) records notes and bonds payable. 
D) makes investment decisions for an entity. 
A) keeps the stockholder list and, from time to time, determines the shareholders eligible to receive dividends. 
B) handles the exchange of shares, canceling the shares surrendered by sellers and issuing new certificates. 
C) records notes and bonds payable. 
D) makes investment decisions for an entity.

Question 15

An audit team's purpose in reviewing the documentation concerning the renewal of a note payable shortly after the balance-sheet date most likely is to obtain evidence concerning management's assertions about:

Accepted Answer

A) existence. 
B) valuation. 
C) completeness. 
D) classification. 
A) existence. 
B) valuation. 
C) completeness. 
D) classification.

Question 16

In auditing for unrecorded long-term bonds payable, an audit team most likely will:

Accepted Answer

A) perform analytical procedures on the bond premium and discount accounts. 
B) examine documentation of assets purchased with bond proceeds for liens. 
C) compare interest expense with the bond payable amount for reasonableness. 
D) confirm the existence of individual bondholders at year-end. 
A) perform analytical procedures on the bond premium and discount accounts. 
B) examine documentation of assets purchased with bond proceeds for liens. 
C) compare interest expense with the bond payable amount for reasonableness. 
D) confirm the existence of individual bondholders at year-end.

Question 17

What is a compensating control? Describe what type of compensating controls might be implemented in the finance and investment cycle.

Accepted Answer

A compensating control is a control acti

Question 18

Which of the following would not be a typical feature of management's control over the production of 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 particular 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 particular accounting estimates are consistent with the company's operational plans

Question 19

In the audit of notes payable, an auditor testing the ASB balance assertion of accuracy and valuation most likely would:

Accepted Answer

A) read directors' and finance committee's minutes for authorization of financing transactions. 
B) select a sample of paid notes and trace interest expense to the general ledger account. 
C) select a sample of paid notes and recalculate interest expense for the period under audit. 
D) select a sample of notes payable and vouch cash receipt to the bank statement. 
A) read directors' and finance committee's minutes for authorization of financing transactions. 
B) select a sample of paid notes and trace interest expense to the general ledger account. 
C) select a sample of paid notes and recalculate interest expense for the period under audit. 
D) select a sample of notes payable and vouch cash receipt to the bank statement.

Question 20

An agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture is called a:

Accepted Answer

A) registrar. 
B) transfer agent. 
C) trustee. 
D) none of the above. 
A) registrar. 
B) transfer agent. 
C) trustee. 
D) none of the above.

Auditors count investment securities held by the client primarily to test the ASB balance assertion of:

Related party transactions:

The typical assertions related to investments and related accounts would not include the PCAOB assertion that:

When a company keeps its own stock records, which of the following procedures is not required?

One primary focus of substantive tests in the finance and investment cycle is on:

Which of the following questions would auditors most likely include on an internal control questionnaire for notes payable?

Which of the following is not an approach an auditor may choose when performing substantive procedures to test accounting estimates?

Which of the following is not an off-balance-sheet item?

When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records, canceled stock certificates should:

All corporate capital stock transactions should ultimately be traced to the:

If it would be appropriate to confirm capital stock, the auditor would obtain the confirmation from:

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

A transfer agent:

An audit team's purpose in reviewing the documentation concerning the renewal of a note payable shortly after the balance-sheet date most likely is to obtain evidence concerning management's assertions about:

In auditing for unrecorded long-term bonds payable, an audit team most likely will:

What is a compensating control? Describe what type of compensating controls might be implemented in the finance and investment cycle.

Which of the following would not be a typical feature of management's control over the production of estimates?

In the audit of notes payable, an auditor testing the ASB balance assertion of accuracy and valuation most likely would:

An agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture is called a:

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Acquisition and Expenditure Cycle 336

Production Cycle 394

Completing the Audit 500

Reports on Audited Financial Statements

Filters

Exam 10: Finance and Investment Cycle 443

Auditors count investment securities held by the client primarily to test the ASB balance assertion of:

Related party transactions:

The typical assertions related to investments and related accounts would not include the PCAOB assertion that:

When a company keeps its own stock records, which of the following procedures is not required?

One primary focus of substantive tests in the finance and investment cycle is on:

Which of the following questions would auditors most likely include on an internal control questionnaire for notes payable?

Which of the following is not an approach an auditor may choose when performing substantive procedures to test accounting estimates?

Which of the following is not an off-balance-sheet item?

When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records, canceled stock certificates should:

All corporate capital stock transactions should ultimately be traced to the:

If it would be appropriate to confirm capital stock, the auditor would obtain the confirmation from:

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

A transfer agent:

An audit team's purpose in reviewing the documentation concerning the renewal of a note payable shortly after the balance-sheet date most likely is to obtain evidence concerning management's assertions about:

In auditing for unrecorded long-term bonds payable, an audit team most likely will:

What is a compensating control? Describe what type of compensating controls might be implemented in the finance and investment cycle.

Which of the following would not be a typical feature of management's control over the production of estimates?

In the audit of notes payable, an auditor testing the ASB balance assertion of accuracy and valuation most likely would:

An agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture is called a:

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash 227

Revenue and Collection Cycle 279

Acquisition and Expenditure Cycle 336

Production Cycle 394

Completing the Audit 500

Reports on Audited Financial Statements

Filters