Question 1

For most companies,the only transactions involving retained earnings are net earnings for the year and dividends declared.

Accepted Answer

A) True 
 B)False

Question 2

Performance materiality is often set at a(n)________ level for notes payable.

Accepted Answer

A) high 
B) moderate 
C) low 
D) unknown 
A) high 
B) moderate 
C) low 
D) unknown

Question 3

You are auditing the long-term notes payable account for a client.Which of the following audit procedures would you most likely employ?

Accepted Answer

A) Compare interest expense recorded by the client with the notes payable account for reasonableness. 
B) Confirm bonds payable with individual bond holders. 
C) Perform analytical procedures on the bond discount or premium account. 
D) Examine bond documents for the presence of hybrid securities. 
A) Compare interest expense recorded by the client with the notes payable account for reasonableness. 
B) Confirm bonds payable with individual bond holders. 
C) Perform analytical procedures on the bond discount or premium account. 
D) Examine bond documents for the presence of hybrid securities.

Question 4

The capital acquisition and repayment cycle does not include

Accepted Answer

A) payment of interest. 
B) payment of dividends. 
C) payment of vendor invoices. 
D) acquisition of capital through interest-bearing debt. 
A) payment of interest. 
B) payment of dividends. 
C) payment of vendor invoices. 
D) acquisition of capital through interest-bearing debt.

Question 5

All of the following are owners' equity accounts except for

Accepted Answer

A) common stock. 
B) paid-in-capital in excess of par. 
C) sales. 
D) retained earnings. 
A) common stock. 
B) paid-in-capital in excess of par. 
C) sales. 
D) retained earnings.

Question 6

One unique characteristic of the capital acquisition and repayment cycle is that relatively few transactions affect the account balances,but each transaction is often highly material in amount.

Accepted Answer

A) True 
 B)False

Question 7

Independent registrars commonly disburse cash dividends to shareholders.

Accepted Answer

A) True 
 B)False

Question 8

In the audit of the transactions and amounts in the capital acquisition and repayment cycle,the auditor must take great care in making sure that the significant legal requirements affecting the financial statements have been properly fulfilled and

Accepted Answer

A) any violations are reported to the SEC. 
B) are adequately disclosed in the financial statements. 
C) must issue a disclaimer if they haven't been fulfilled. 
D) any departures from the agreements are made with management's knowledge and consent. 
A) any violations are reported to the SEC. 
B) are adequately disclosed in the financial statements. 
C) must issue a disclaimer if they haven't been fulfilled. 
D) any departures from the agreements are made with management's knowledge and consent.

Question 9

Any company with stock listed on a securities exchange is required to engage a(n)

Accepted Answer

A) equity analyst. 
B) stock transfer agent. 
C) independent registrar. 
D) equity placement specialist. 
A) equity analyst. 
B) stock transfer agent. 
C) independent registrar. 
D) equity placement specialist.

Question 10

Identify three substantive analytical procedures commonly performed for notes payable.

Accepted Answer

Some possible analytical procedures for

Question 11

When a company maintains its own records of stock transactions and outstanding stock,internal controls must be adequate to ensure that

Accepted Answer

A) actual owners are recorded in the bylaws. 
B) the correct amount of dividends is paid to stockholders owning the stock on the dividend record date. 
C) the correct amount of dividends is paid to stockholders owning the stock on the declaration date. 
D) actual owners are recorded in the minutes. 
A) actual owners are recorded in the bylaws. 
B) the correct amount of dividends is paid to stockholders owning the stock on the dividend record date. 
C) the correct amount of dividends is paid to stockholders owning the stock on the declaration date. 
D) actual owners are recorded in the minutes.

Question 12

The two most important balance-related audit objectives for notes payable are

Accepted Answer

A) completeness and detail tie-in. 
B) completeness and valuation. 
C) accuracy and valuation. 
D) accuracy and completeness. 
A) completeness and detail tie-in. 
B) completeness and valuation. 
C) accuracy and valuation. 
D) accuracy and completeness.

Question 13

Match between columns
                        Premises: an outside person engaged by a corporation to maintain the stockholder records
an outside person engaged by a corporation to make sure that its stock is issued in accordance with capital stock provisions in the corporate charter and authorizations by the board of directors
a record of the issuance and repurchase of capital stock for the life of the corporation
the cycle that concerns the acquisition of capital resources through interest-bearing debt and owners' equity and repayment of the capital
the normal starting point for the audit of notes payable;includes detailed information of all transactions related to notes payable that took place during the year
an entity that is required to engage an independent registrar

Accepted Answer

The Answer of stock maintenance agent and independent registrar and is...

Question 14

An auditor is determining whether an issuance of notes payable for cash was correctly recorded.Her best course of action would be to

Accepted Answer

A) confirm with the bond trustee as to the amount of bonds issued. 
B) confirm with the underwriter as to the appropriate market yield on the bonds. 
C) trace the cash received from the proceeds to the accounting records. 
D) verify that the amount was included in a footnote disclosure. 
A) confirm with the bond trustee as to the amount of bonds issued. 
B) confirm with the underwriter as to the appropriate market yield on the bonds. 
C) trace the cash received from the proceeds to the accounting records. 
D) verify that the amount was included in a footnote disclosure.

Question 15

A shareholders' capital stock master file is a record of the issuance and repurchase of capital stock over the life of the corporation.

Accepted Answer

A) True 
 B)False

Question 16

Few large companies employ stock transfer agents,but small companies commonly do so.

Accepted Answer

A) True 
 B)False

Question 17

The record of the issuance and repurchase of capital stock for the life of the corporation is maintained in the

Accepted Answer

A) shareholders' capital stock master file. 
B) capital stock certificate record. 
C) schedule of stock owners. 
D) corporate directory. 
A) shareholders' capital stock master file. 
B) capital stock certificate record. 
C) schedule of stock owners. 
D) corporate directory.

Question 18

Discuss the four key controls over notes payable.

Accepted Answer

The four key controls over notes payable

Question 19

You are employing tests of details of balances for notes payable and interest expense.Describe below specific audit procedures you would perform for the balance-related audit objectives of detail tie-in and existence.List at least two for each objective.

Accepted Answer

Detail tie-in: (1)foot the notes payable

Question 20

The three most important balance-related audit objectives for notes payable are existence,realizable value,and accuracy.

Accepted Answer

A) True 
 B)False

Exam 22: Audit of the Capital Acquisition and Repayment Cycle

For most companies,the only transactions involving retained earnings are net earnings for the year and dividends declared.

Performance materiality is often set at a(n)________ level for notes payable.

You are auditing the long-term notes payable account for a client.Which of the following audit procedures would you most likely employ?

The capital acquisition and repayment cycle does not include

All of the following are owners' equity accounts except for

One unique characteristic of the capital acquisition and repayment cycle is that relatively few transactions affect the account balances,but each transaction is often highly material in amount.

Independent registrars commonly disburse cash dividends to shareholders.

In the audit of the transactions and amounts in the capital acquisition and repayment cycle,the auditor must take great care in making sure that the significant legal requirements affecting the financial statements have been properly fulfilled and

Any company with stock listed on a securities exchange is required to engage a(n)

Identify three substantive analytical procedures commonly performed for notes payable.

When a company maintains its own records of stock transactions and outstanding stock,internal controls must be adequate to ensure that

The two most important balance-related audit objectives for notes payable are

An auditor is determining whether an issuance of notes payable for cash was correctly recorded.Her best course of action would be to

A shareholders' capital stock master file is a record of the issuance and repurchase of capital stock over the life of the corporation.

Few large companies employ stock transfer agents,but small companies commonly do so.

The record of the issuance and repurchase of capital stock for the life of the corporation is maintained in the

Discuss the four key controls over notes payable.

You are employing tests of details of balances for notes payable and interest expense.Describe below specific audit procedures you would perform for the balance-related audit objectives of detail tie-in and existence.List at least two for each objective.

The three most important balance-related audit objectives for notes payable are existence,realizable value,and accuracy.

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Completing the Tests in the Acquisition and Payment Cycle:

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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