Question 1

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 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
the cycle that concerns the acquisition of capital resources through interest-bearing debt and owners' equity and repayment of the capital

Accepted Answer

The Answer of capital acquisition and repayment cycle and publicly is...

Question 2

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

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 3

When auditing interest-bearing debt, the auditor should ________ verify the related interest expense and interest payable.

Accepted Answer

A)  not 
B)  attempt to 
C)  simultaneously 
D)  never 
A)  not 
B)  attempt to 
C)  simultaneously 
D)  never

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

When a company maintains its own records of stock transactions and capital stock outstanding, its internal controls must be adequate to accomplish three objectives. List them below.

Accepted Answer

1. Actual owners of the stock are recogn

Question 6

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

Accepted Answer

A)  it is not unusual for the auditor to duplicate a process, thereby gathering a larger quantity of evidence. 
B)  replicating the evidence will provide the auditor with a higher level of assurance. 
C)  the tests done in the acquisitions and payments cycle will look only at the cash credit side so the tests done in the capital acquisitions and repayment cycle will look at the debit side of the transaction. 
D)  due to the infrequency of these transactions, in many cases no transactions involving notes payable are included in the sample tests of acquisitions and payments. 
A)  it is not unusual for the auditor to duplicate a process, thereby gathering a larger quantity of evidence. 
B)  replicating the evidence will provide the auditor with a higher level of assurance. 
C)  the tests done in the acquisitions and payments cycle will look only at the cash credit side so the tests done in the capital acquisitions and repayment cycle will look at the debit side of the transaction. 
D)  due to the infrequency of these transactions, in many cases no transactions involving notes payable are included in the sample tests of acquisitions and payments.

Question 7

Why are substantive analytical procedures essential for notes payable?

Accepted Answer

They are essential because tes

Question 8

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 9

What type of audit test will auditors use when testing to see if the amounts of capital stock transactions are accurately recorded?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 10

One of the balance-related audit objectives of notes payable balances includes Are notes payable correctly classified on the balance sheet?
 (presentation). List two common tests of details for notes payable which should be considered in meeting this audit objective.

Accepted Answer

Examine the due dates on notes payable t

Question 11

Auditors often set performance materiality at a low level for accounts in the capital acquisition and repayment cycle because it is usually possible to completely audit the account balance and each of the transactions in these accounts.

Accepted Answer

A) True 
 B)False

Question 12

Identify three substantive analytical procedures commonly performed for notes payable.

Accepted Answer

Some possible analytical procedures for

Question 13

Typically, auditors set inherent risk at a low level for notes payable, as the correct value is usually easy to determine.

Accepted Answer

A) True 
 B)False

Question 14

Auditing capital stock transactions as part of a merger is challenging because judgment is often involved.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is correct regarding the capital acquisition and payment cycle?

Accepted Answer

A)  Bonds are frequently issued by companies in small amounts. 
B)  There are relatively few transactions and each transaction is typically highly material. 
C)  A primary emphasis in auditing debt is on existence. 
D)  Audit procedures for notes payable and interest income are often performed simultaneously. 
A)  Bonds are frequently issued by companies in small amounts. 
B)  There are relatively few transactions and each transaction is typically highly material. 
C)  A primary emphasis in auditing debt is on existence. 
D)  Audit procedures for notes payable and interest income are often performed simultaneously.

Question 16

Which of the following would generally not need to be approved by the board of directors?

Accepted Answer

A)  issuing capital stock 
B)  repurchasing capital stock 
C)  declaration of a dividend 
D)  payment of a dividend 
A)  issuing capital stock 
B)  repurchasing capital stock 
C)  declaration of a dividend 
D)  payment of a dividend

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

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

Accepted Answer

A) True 
 B)False

Question 19

Which of the following balance-related audit objectives is not applicable to the audit of notes payable?

Accepted Answer

A)  realizable value 
B)  detail tie-in 
C)  cutoff 
D)  classification 
A)  realizable value 
B)  detail tie-in 
C)  cutoff 
D)  classification

Question 20

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.

Exam 22: Audit of the Capital Acquisition and Repayment Cycle

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

When auditing interest-bearing debt, the auditor should ________ verify the related interest expense and interest payable.

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

When a company maintains its own records of stock transactions and capital stock outstanding, its internal controls must be adequate to accomplish three objectives. List them below.

Why are substantive analytical procedures essential for notes payable?

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

What type of audit test will auditors use when testing to see if the amounts of capital stock transactions are accurately recorded?

One of the balance-related audit objectives of notes payable balances includes Are notes payable correctly classified on the balance sheet? (presentation). List two common tests of details for notes payable which should be considered in meeting this audit objective.

Auditors often set performance materiality at a low level for accounts in the capital acquisition and repayment cycle because it is usually possible to completely audit the account balance and each of the transactions in these accounts.

Identify three substantive analytical procedures commonly performed for notes payable.

Typically, auditors set inherent risk at a low level for notes payable, as the correct value is usually easy to determine.

Auditing capital stock transactions as part of a merger is challenging because judgment is often involved.

Which of the following statements is correct regarding the capital acquisition and payment cycle?

Which of the following would generally not need to be approved by the board of directors?

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

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

Which of the following balance-related audit objectives is not applicable to the audit of notes payable?

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

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

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