Exam 22: Audit of the Capital Acquisition and Repayment Cycle

Which of the following audit tests would provide evidence regarding the balance-related audit objective of existence for an audit of notes payable?

The audit procedure "Review the notes to determine whether any are related party notes or accounts payable" is performed when verifying the classification objective for notes payable.

There is an indirect relationship between the interest and dividends accounts and debt and equity.

The primary audit objectives to focus on when auditing accounts in the capital acquisition and repayment cycle are

In the audit of notes payable,it is common to include tests of principal and interest payments as a part of the audit of the acquisitions and payment cycle because the payments are in the cash disbursements journal that is being sampled.It is also normal to test these transactions as part of the capital acquisitions and repayment cycle because

List six accounts in the capital acquisition and repayment cycle commonly found on balance sheets of corporations.What characteristics do these accounts have in common that distinguish them from other accounts?

If loans require significant restrictions on the activities of the company,they must be disclosed in the footnotes.

Which of the following owners' equity transactions usually require specific authorization from a company's board of directors?

In auditing debits and credits to retained earnings,other than net income and dividends,the auditors first concern is

A prior period adjustment may result in a debit or credit to a company's retained earnings account.

What are the two most important balance-related audit objectives in notes payable?

List the four characteristics of the capital acquisition and repayment cycle that make it unique from other cycles.

When verifying if capital stock is accurately recorded,

The tests of details of balances procedure which 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

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

Examining the minutes of the board of directors' meetings for proper authorization ordinarily tests the occurrence objective for capital stock transactions.

When a dividend is declared by the board of directors,the source for determining who should receive dividend checks is the

Discuss the overall objectives of the audit of notes payable.

The audit objective that requires the auditor to determine that notes payable on the notes payable schedule are properly classified can be tested by performing the procedure to

The emphasis in the audit of dividends is on the ending balance rather than the transactions.