Question 1

The auditors are required to confirm bond holdings directly with the bondholders.

Accepted Answer

A) True 
 B)False  False

Question 2

Match between columns
                        Premises: An accountfor stock issuance proceeds in excess of book value.
An unsecured bond, dependentupon the general creditof the issuer.
Contains a separate record for each stockholder.
A book with serially numbered stock certificates with attached stubs.
Charged with maintaining detailed records of shareholders and handling purchases and sales of stock.

Accepted Answer

The Answer of Stockholders ledger and Stock certificate holder and is...

Question 3

Bond transactions are normally confirmed with:

Accepted Answer

A) Individual holders of retired bonds. 
B) Recomputation procedures performed using interest expense. 
C) The bond trustee. 
D) Comparisons of retired bonds with those outstanding. 
A) Individual holders of retired bonds. 
B) Recomputation procedures performed using interest expense. 
C) The bond trustee. 
D) Comparisons of retired bonds with those outstanding. C

Question 4

To establish effective internal control over a corporation's stock transactions,the corporation should utilize the services of a independent registrar and transfer agent.
a.Describe the functions performed by the stock registrar.
b.Describe the functions performed by the transfer agent.
c.Describe the information that is typically requested by the auditors in a confirmation sent to the registrar.

Accepted Answer

a.The stock registrar controls the corpo

Question 5

When the auditors obtain an understanding of internal control for the financing cycle,documentation will frequently include a written description as well as a(n):

Accepted Answer

A) List of audit objectives. 
B) Decision table. 
C) Summary of tests of controls. 
D) Internal control questionnaire. 
A) List of audit objectives. 
B) Decision table. 
C) Summary of tests of controls. 
D) Internal control questionnaire.

Question 6

An auditor obtains evidence of stockholders' equity transactions for a publicly traded company by reviewing the entity's:

Accepted Answer

A) Minutes of board of directors meetings. 
B) Registrar's record of interbank transfers. 
C) Canceled stock certificates. 
D) Treasury stock certificate book. 
A) Minutes of board of directors meetings. 
B) Registrar's record of interbank transfers. 
C) Canceled stock certificates. 
D) Treasury stock certificate book.

Question 7

During its fiscal year,a company issued,at a discount,a substantial amount of first-mortgage bonds.When performing audit work in connection with the bond issue,the independent auditor should:

Accepted Answer

A) Confirm the existence of the bondholders. 
B) Review the minutes for authorization. 
C) Trace the net cash received from the issuance to the bond revenue account. 
D) Inspect the records maintained by the bond trustee. 
A) Confirm the existence of the bondholders. 
B) Review the minutes for authorization. 
C) Trace the net cash received from the issuance to the bond revenue account. 
D) Inspect the records maintained by the bond trustee.

Question 8

In which of the following accounts would one expect a related party transaction to be easiest to detect?

Accepted Answer

A) Accounts receivable. 
B) Accounts payable. 
C) Notes payable. 
D) Cash. 
A) Accounts receivable. 
B) Accounts payable. 
C) Notes payable. 
D) Cash.

Question 9

Which of the following is the most important consideration of an auditor when examining the stockholders' equity section of a client's balance sheet?

Accepted Answer

A) Changes in the capital stock account are verified by an independent stock transfer agent. 
B) Stock dividends and/or stock splits during the year under audit were approved by the stockholders. 
C) Stock dividends are capitalized at par or stated value on the dividend declaration date. 
D) Entries in the capital stock account can be traced to a resolution in the minutes of the board of directors' meetings. 
A) Changes in the capital stock account are verified by an independent stock transfer agent. 
B) Stock dividends and/or stock splits during the year under audit were approved by the stockholders. 
C) Stock dividends are capitalized at par or stated value on the dividend declaration date. 
D) Entries in the capital stock account can be traced to a resolution in the minutes of the board of directors' meetings.

Question 10

The auditor's plan to examine interest-bearing debt most likely will include steps that require:

Accepted Answer

A) Comparing the book value of the debt to its year-end market value. 
B) Vouching borrowing and repayment transactions. 
C) Verifying the proper presentation of the debt through confirmation. 
D) Inspecting the accounts payable subsidiary ledger for unrecorded interest-bearing debt. 
A) Comparing the book value of the debt to its year-end market value. 
B) Vouching borrowing and repayment transactions. 
C) Verifying the proper presentation of the debt through confirmation. 
D) Inspecting the accounts payable subsidiary ledger for unrecorded interest-bearing debt.

Question 11

For a large publicly traded client,the auditors' examination of capital stock accounts will not normally include:

Accepted Answer

A) Analysis of capital stock accounts. 
B) Confirmation of shares issued with the independent registrar. 
C) Accounting for the proceeds of major stock issues. 
D) Reconciliation of a stock certificate book with the general ledger. 
A) Analysis of capital stock accounts. 
B) Confirmation of shares issued with the independent registrar. 
C) Accounting for the proceeds of major stock issues. 
D) Reconciliation of a stock certificate book with the general ledger.

Question 12

The formal documentation creating bond indebtedness is called the certificate.

Accepted Answer

A) True 
 B)False

Question 13

In the audit of the allocation of income for a partnership,the auditors would be most interested in reviewing:

Accepted Answer

A) Federal Partnership Law. 
B) State Partnership Law. 
C) Board of directors minutes. 
D) The partnership agreement. 
A) Federal Partnership Law. 
B) State Partnership Law. 
C) Board of directors minutes. 
D) The partnership agreement.

Question 14

Company A does not employ an independent stock transfer agent,but rather issues its own stock and maintains its stock records.When outstanding shares are transferred from one holder to another,the certificate of the selling shareholder should be:

Accepted Answer

A) Canceled (generally by perforation)and attached to the certificate book. 
B) Destroyed to prevent fraudulent reissuance. 
C) Retained by the selling shareholder. 
D) Sent to the state's registrar of investment securities. 
A) Canceled (generally by perforation)and attached to the certificate book. 
B) Destroyed to prevent fraudulent reissuance. 
C) Retained by the selling shareholder. 
D) Sent to the state's registrar of investment securities.

Question 15

An audit plan for the examination of the retained earnings account should include a step that requires verification of the:

Accepted Answer

A) Market value used to charge retained earnings to account for a two-for-one stock split. 
B) Approval of the adjustment to the beginning balance as a result of a write-down of an account receivable. 
C) Authorization for both cash and stock dividends. 
D) Gain or loss resulting from disposition of treasury shares. 
A) Market value used to charge retained earnings to account for a two-for-one stock split. 
B) Approval of the adjustment to the beginning balance as a result of a write-down of an account receivable. 
C) Authorization for both cash and stock dividends. 
D) Gain or loss resulting from disposition of treasury shares.

Question 16

Dividends should be authorized by the stockholders of the corporation.

Accepted Answer

A) True 
 B)False

Question 17

The auditors' program for the examination of long-term debt should include steps that require the:

Accepted Answer

A) Verification of the existence of the bondholders. 
B) Identification of notes payable to related parties. 
C) Inspection of the accounts payable subsidiary ledger. 
D) Investigation of credits to the bond interest income accounts. 
A) Verification of the existence of the bondholders. 
B) Identification of notes payable to related parties. 
C) Inspection of the accounts payable subsidiary ledger. 
D) Investigation of credits to the bond interest income accounts.

Question 18

Which of the following most likely would approve the issuance of notes payable?

Accepted Answer

A) Controller. 
B) Payroll. 
C) Personnel. 
D) Treasurer. 
A) Controller. 
B) Payroll. 
C) Personnel. 
D) Treasurer.

Question 19

Internal control over bonds payable is best when:

Accepted Answer

A) The company utilizes the services of a bond trustee. 
B) The company segregates approval from issuance of the bonds. 
C) Bonds are countersigned by two officers. 
D) Bonds are serially numbered. 
A) The company utilizes the services of a bond trustee. 
B) The company segregates approval from issuance of the bonds. 
C) Bonds are countersigned by two officers. 
D) Bonds are serially numbered.

Question 20

Which of the following is an auditor most likely to confirm from the transfer agent and registrar?

Accepted Answer

A) Total shares of stock issued. 
B) Restrictions on the payment of dividends. 
C) Total market value of outstanding shares of stock. 
D) Gains from sale of treasury stock. 
A) Total shares of stock issued. 
B) Restrictions on the payment of dividends. 
C) Total market value of outstanding shares of stock. 
D) Gains from sale of treasury stock.

The auditors are required to confirm bond holdings directly with the bondholders.

Bond transactions are normally confirmed with:

When the auditors obtain an understanding of internal control for the financing cycle,documentation will frequently include a written description as well as a(n):

An auditor obtains evidence of stockholders' equity transactions for a publicly traded company by reviewing the entity's:

During its fiscal year,a company issued,at a discount,a substantial amount of first-mortgage bonds.When performing audit work in connection with the bond issue,the independent auditor should:

In which of the following accounts would one expect a related party transaction to be easiest to detect?

Which of the following is the most important consideration of an auditor when examining the stockholders' equity section of a client's balance sheet?

The auditor's plan to examine interest-bearing debt most likely will include steps that require:

For a large publicly traded client,the auditors' examination of capital stock accounts will not normally include:

The formal documentation creating bond indebtedness is called the certificate.

In the audit of the allocation of income for a partnership,the auditors would be most interested in reviewing:

Company A does not employ an independent stock transfer agent,but rather issues its own stock and maintains its stock records.When outstanding shares are transferred from one holder to another,the certificate of the selling shareholder should be:

An audit plan for the examination of the retained earnings account should include a step that requires verification of the:

Dividends should be authorized by the stockholders of the corporation.

The auditors' program for the examination of long-term debt should include steps that require the:

Which of the following most likely would approve the issuance of notes payable?

Internal control over bonds payable is best when:

Which of the following is an auditor most likely to confirm from the transfer agent and registrar?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

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Exam 15: Debt and Equity Capital

The auditors are required to confirm bond holdings directly with the bondholders.

Bond transactions are normally confirmed with:

When the auditors obtain an understanding of internal control for the financing cycle,documentation will frequently include a written description as well as a(n):

An auditor obtains evidence of stockholders' equity transactions for a publicly traded company by reviewing the entity's:

During its fiscal year,a company issued,at a discount,a substantial amount of first-mortgage bonds.When performing audit work in connection with the bond issue,the independent auditor should:

In which of the following accounts would one expect a related party transaction to be easiest to detect?

Which of the following is the most important consideration of an auditor when examining the stockholders' equity section of a client's balance sheet?

The auditor's plan to examine interest-bearing debt most likely will include steps that require:

For a large publicly traded client,the auditors' examination of capital stock accounts will not normally include:

The formal documentation creating bond indebtedness is called the certificate.

In the audit of the allocation of income for a partnership,the auditors would be most interested in reviewing:

Company A does not employ an independent stock transfer agent,but rather issues its own stock and maintains its stock records.When outstanding shares are transferred from one holder to another,the certificate of the selling shareholder should be:

An audit plan for the examination of the retained earnings account should include a step that requires verification of the:

Dividends should be authorized by the stockholders of the corporation.

The auditors' program for the examination of long-term debt should include steps that require the:

Which of the following most likely would approve the issuance of notes payable?

Internal control over bonds payable is best when:

Which of the following is an auditor most likely to confirm from the transfer agent and registrar?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Property,plant,and Equipment: Depreciation and Depletion

Accounts Payable and Other Liabilities

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters