Exam 16: Audit of the Capital Acquisition and Repayment Cycle

As part of the audit, the auditor may examine authorization procedures with respect to the repurchase or redemption of capital stock. In particular, for a public company the auditor would verify that which of the following details have been authorized?

Tests of details for notes payable interest expense and accrued interest can frequently be eliminated when

The auditor has reconciled the dividend payment amounts disbursed according to the cash disbursements journal to the dividend declared. Which audit assertions is this test associated with?

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 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?

The exclusion of a single transaction of the capital acquisition and repayment cycle could be material in itself. This means that the following audit assertion is a major audit concern:

It is normal practice to verify all capital stock transactions

The normal starting point for the audit of notes payable is

In the audit of the transactions and amounts in the capital acquisitions and repayments cycle, the auditor must ensure that significant legal requirements affecting the financial statements have been properly fulfilled and

Caroline is performing the audit of the capital acquisition and repayment cycle. She is currently auditing the payments of interest made during the year. The proper documentation that Caroline should use as supporting evidence of the payment is

If a company employs a capital stock registrar and/or transfer agent, the registrar or agent (or both) should be requested to confirm directly to the auditor the number of shares of each class of stock

Presentation and disclosure are important because acceptable financial reporting frameworks require that footnotes adequately describe the terms of notes payable outstanding and the assets pledged as collateral for the loans. Which assertion does this relate to?

A primary concern in determining whether retained earnings is correctly disclosed on the balance sheet is

State the specific balance-related audit objectives applicable to notes payable and interest and, for each objective, identify one common test of details of balances.

There is a direct relationship between the interest and dividend accounts and debt and equity. This means that in the audit of interest-bearing debt, it is desirable to simultaneously verify

Comparison of individual notes payable outstanding with the prior year could detect what type of possible misstatement?

The audit objective requiring that existing notes payable are included in the notes payable schedule (completeness) is satisfied by performing the following audit procedure.

The transfer agent confirmed to the auditor that the company had 2 500 000 shares outstanding at December 31, 2010. To have assurance over the accuracy of the dividend payable, the auditor would multiply 2 500 000 by the

Recalculation of an approximate interest expense using the basis of average interests rates and overall monthly notes payable could detect what type of possible misstatement?

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?