Question 1

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 2

The audit objective to determine that notes payable in the schedule actually exist is verified by the test of details of balances procedure to

Accepted Answer

A)  foot the notes payable list. 
B)  confirm notes payable. 
C)  recalculate interest expense. 
D)  examine the balance sheet for proper disclosure of noncurrent portions. 
A)  foot the notes payable list. 
B)  confirm notes payable. 
C)  recalculate interest expense. 
D)  examine the balance sheet for proper disclosure of noncurrent portions.

Question 3

Accounts including preferred stock, additional paid-in capital, and treasury stock are not included in the capital acquisition and repayment cycle.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)  confirm notes payable. 
B)  examine corporate minutes for loan approval. 
C)  examine notes, minutes, and bank confirmations for restrictions. 
D)  review the notes to determine whether any are with related parties. 
A)  confirm notes payable. 
B)  examine corporate minutes for loan approval. 
C)  examine notes, minutes, and bank confirmations for restrictions. 
D)  review the notes to determine whether any are with related parties.

Question 5

The audit procedure "Foot the notes payable list and trace the totals to the general ledger" is performed when verifying the accuracy objective for notes payable.

Accepted Answer

A) True 
 B)False

Question 6

Financial instruments or securities that combine features of both debt and equity are commonly known as hybrid securities.

Accepted Answer

A) True 
 B)False

Question 7

Discuss the internal controls related to owners' equity that are of concern to the auditor.

Accepted Answer

• Proper authorization of transactions.

Question 8

The board of directors must authorize the amount of the dividend per share and the dates of record and payment of the dividend.

Accepted Answer

A) True 
 B)False

Question 9

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 10

The authorization of an issuance of capital stock normally includes all but which of the following?

Accepted Answer

A)  type of stock to be issued 
B)  number of shares to be issued 
C)  date shares are to be issued 
D)  amount of dividend to be paid on shares issued 
A)  type of stock to be issued 
B)  number of shares to be issued 
C)  date shares are to be issued 
D)  amount of dividend to be paid on shares issued

Question 11

The record of the outstanding shares at any given time is maintained in the

Accepted Answer

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

Question 12

Which of the following types of owners' equity transactions would require authorization by the board of directors?

Accepted Answer

A)  issuance of capital stock 
B)  repurchase of capital stock 
C)  declaration of dividends 
D)  all of the above 
A)  issuance of capital stock 
B)  repurchase of capital stock 
C)  declaration of dividends 
D)  all of the above

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not an important control over notes payable?

Accepted Answer

A)  There is proper authorization over the issuance of new notes payable. 
B)  Notes payable are issued when the business climate is favorable. 
C)  Adequate controls exist over repayment of interest and principal. 
D)  There exist proper documents and records. 
A)  There is proper authorization over the issuance of new notes payable. 
B)  Notes payable are issued when the business climate is favorable. 
C)  Adequate controls exist over repayment of interest and principal. 
D)  There exist proper documents and records.

Question 15

The tests of details of balances procedure which requires the auditor to trace the totals of the notes payable list to the general ledger satisfies the audit objective of

Accepted Answer

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

Question 16

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 17

The capital acquisition and repayment cycle includes the payment of interest on debt and dividends to shareholders.

Accepted Answer

A) True 
 B)False

Question 18

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?

Accepted Answer

Balance sheet accounts in the capital ac

Question 19

The balance-related audit objective realizable value is not applicable when auditing notes payable.

Accepted Answer

A) True 
 B)False

Question 20

Notes payable are generally for a period of sixty days or less.

Accepted Answer

A) True 
 B)False

Exam 22: Audit of the Capital Acquisition and Repayment Cycle

The capital acquisition and repayment cycle does not include

The audit objective to determine that notes payable in the schedule actually exist is verified by the test of details of balances procedure to

Accounts including preferred stock, additional paid-in capital, and treasury stock are not included in the capital acquisition and repayment cycle.

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 audit procedure "Foot the notes payable list and trace the totals to the general ledger" is performed when verifying the accuracy objective for notes payable.

Financial instruments or securities that combine features of both debt and equity are commonly known as hybrid securities.

Discuss the internal controls related to owners' equity that are of concern to the auditor.

The board of directors must authorize the amount of the dividend per share and the dates of record and payment of the dividend.

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

The authorization of an issuance of capital stock normally includes all but which of the following?

The record of the outstanding shares at any given time is maintained in the

Which of the following types of owners' equity transactions would require authorization by the board of directors?

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

Which of the following is not an important control over notes payable?

The tests of details of balances procedure which requires the auditor to trace the totals of the notes payable list to the general ledger satisfies the audit objective of

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

The capital acquisition and repayment cycle includes the payment of interest on debt and dividends to shareholders.

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?

The balance-related audit objective realizable value is not applicable when auditing notes payable.

Notes payable are generally for a period of sixty days or less.

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 Materiality

Assessing the Risk of Material Misstatement

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, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

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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