Question 1

Compensating controls in the finance and investment cycle

Accepted Answer

A)  feature separation of duties by upper management. 
B)  feature involvement of two or more persons handling all important responsibilities. 
C)  include involvement by the external auditor. 
D)  include all the above. 
A)  feature separation of duties by upper management. 
B)  feature involvement of two or more persons handling all important responsibilities. 
C)  include involvement by the external auditor. 
D)  include all the above.

Question 2

When fixed assets are acquired during the year under audit,auditors should inspect the assets.

Accepted Answer

A) True 
 B)False

Question 3

The most significant inherent risk in the fiancé and investment cycle is the proper presentation of items on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 4

Documentation of a count of equity securities should include all of the following except

Accepted Answer

A)  interest rate. 
B)  serial numbers. 
C)  number of shares. 
D)  market value. 
A)  interest rate. 
B)  serial numbers. 
C)  number of shares. 
D)  market value.

Question 5

A client has a large and active investment portfolio that is kept in a bank safe deposit box.If the auditors are unable to count securities at the balance-sheet date,they most likely will

Accepted Answer

A)  request the bank to confirm to the auditors the contents of the safe deposit box at the balance-sheet date. 
B)  examine supporting evidence for transactions occurring during the year. 
C)  count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance-sheet date. 
D)  request the client to have the bank seal the safe deposit box until the auditors can count the securities at a subsequent date. 
A)  request the bank to confirm to the auditors the contents of the safe deposit box at the balance-sheet date. 
B)  examine supporting evidence for transactions occurring during the year. 
C)  count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance-sheet date. 
D)  request the client to have the bank seal the safe deposit box until the auditors can count the securities at a subsequent date.

Question 6

Investment transactions list on the monthly statement from the broker should be vouched to the broker's advice,proper authorization,and the cash accounts.

Accepted Answer

A) True 
 B)False

Question 7

_______________________________ is responsible for making estimates and should have a _____________________________ and _____________________________ designed to reduce the likelihood of material misstatements in them.
Question also found in study guide

Accepted Answer

Client's m

Question 8

Which of the following controls would be most effective in ensuring that the proper custody of assets in the investing cycle is maintained?

Accepted Answer

A)  Direct access to securities in the safety deposit box is limited to only one corporate officer. 
B)  Personnel who post investment transactions to the general ledger are not permitted to update the investment subsidiary ledger. 
C)  The purchase and sale of investments are executed on the specific authorization of the board of directors. 
D)  Independent personnel periodically compare the recorded balances in the investment subsidiary ledger with the contents of the safety deposit box. 
A)  Direct access to securities in the safety deposit box is limited to only one corporate officer. 
B)  Personnel who post investment transactions to the general ledger are not permitted to update the investment subsidiary ledger. 
C)  The purchase and sale of investments are executed on the specific authorization of the board of directors. 
D)  Independent personnel periodically compare the recorded balances in the investment subsidiary ledger with the contents of the safety deposit box.

Question 9

When auditing the valuation assertion of an equity method investment,which of the following is the auditor most likely to do?

Accepted Answer

A)  Inspect stock certificates. 
B)  Obtain audited financial statements of the investee company. 
C)  Obtain the market price of the stock as of year-end. 
D)  Review management's calculations. 
A)  Inspect stock certificates. 
B)  Obtain audited financial statements of the investee company. 
C)  Obtain the market price of the stock as of year-end. 
D)  Review management's calculations.

Question 10

An ___________________________________ is an approximation of a financial statement element,item,or account.
Question also found in study guide

Accepted Answer

The answer of An ___________________________________ is an approximation of a...

Question 11

Derivative instruments include

Accepted Answer

A)  stocks. 
B)  preferred stocks. 
C)  stock options. 
D)  all the above. 
A)  stocks. 
B)  preferred stocks. 
C)  stock options. 
D)  all the above.

Question 12

Documenting ownership of bonds can be handled by a registrar and transfer agent.

Accepted Answer

A) True 
 B)False

Question 13

All corporate capital stock transactions should ultimately be traced to the

Accepted Answer

A)  minutes of the meetings of the board of directors. 
B)  cash receipts journal. 
C)  cash disbursements journal. 
D)  numbered stock certificates. 
A)  minutes of the meetings of the board of directors. 
B)  cash receipts journal. 
C)  cash disbursements journal. 
D)  numbered stock certificates.

Question 14

A CUSIP number is used to identify loans taken from a bank.

Accepted Answer

A) True 
 B)False

Question 15

Red Corporation had a temporary cash squeeze near its balance-sheet date.It needed cash badly for a seasonal dip in sales.However,a loan covenant requiring a certain debt/equity ratio would be violated if any additional money were borrowed.To remedy this,the top two officers of the Corporation set up another corporation,Pink Inc.,Red made a large sale of inventory to Pink at cost.Pink used the inventory as collateral for a three-month loan from a local bank.The money from the loan was used to pay Red for the accounts receivable resulting from the "sale." The officers intended to have Red buy back the inventory from Pink at the end of the three-month period at a price that would allow Pink to pay off the loan plus interest.
Required:
a.How would this transaction designed by the two officers enable Red to maintain its required debt/equity ratio while obtaining the cash it needed?
b.What tests of controls and substantive tests would enable an auditor to detect this scheme?

Accepted Answer

a.By devising this transaction as a sale

Question 16

An audit team testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the

Accepted Answer

A)  existence of unrealized gains or losses. 
B)  completeness of recorded investment income. 
C)  classification as available-for-sale or trading securities. 
D)  valuation of trading securities. 
A)  existence of unrealized gains or losses. 
B)  completeness of recorded investment income. 
C)  classification as available-for-sale or trading securities. 
D)  valuation of trading securities.

Question 17

Jones was engaged to examine the financial statements of Gamma Corporation for the year ended June 30.Having completed an examination of the investment securities,which of the following is the best method of verifying the accuracy of recorded dividend income?

Accepted Answer

A)  Tracing recorded dividend income to cash receipts records and validated deposit slips. 
B)  Performing analytical procedures and statistical sampling. 
C)  Comparing recorded dividends with amounts appearing on federal information Form 1099. 
D)  Comparing recorded dividends with a standard financial reporting service's record of dividends. 
A)  Tracing recorded dividend income to cash receipts records and validated deposit slips. 
B)  Performing analytical procedures and statistical sampling. 
C)  Comparing recorded dividends with amounts appearing on federal information Form 1099. 
D)  Comparing recorded dividends with a standard financial reporting service's record of dividends.

Question 18

A _____________________________ is a financial institution appointed to record the issuance and ownership of company securities.
Question also found in study guide

Accepted Answer

The answer of A _____________________________ is a financial institution appointed...

Question 19

The typical business activity of the finance and investment cycle would not include

Accepted Answer

A)  proposals for cash forecasts, capital budgets, and business expansion. 
B)  analysis of excess cash funds. 
C)  reconciliation of cash. 
D)  sale of stocks, bonds, or notes. 
A)  proposals for cash forecasts, capital budgets, and business expansion. 
B)  analysis of excess cash funds. 
C)  reconciliation of cash. 
D)  sale of stocks, bonds, or notes.

Question 20

Dividends received from stock investments can be verified by examing the company's cash receipts journal.

Accepted Answer

A) True 
 B)False

Compensating controls in the finance and investment cycle

When fixed assets are acquired during the year under audit,auditors should inspect the assets.

The most significant inherent risk in the fiancé and investment cycle is the proper presentation of items on the balance sheet.

Documentation of a count of equity securities should include all of the following except

A client has a large and active investment portfolio that is kept in a bank safe deposit box.If the auditors are unable to count securities at the balance-sheet date,they most likely will

Investment transactions list on the monthly statement from the broker should be vouched to the broker's advice,proper authorization,and the cash accounts.

_________________ is responsible for making estimates and should have a _ and _______________ designed to reduce the likelihood of material misstatements in them. Question also found in study guide

Which of the following controls would be most effective in ensuring that the proper custody of assets in the investing cycle is maintained?

When auditing the valuation assertion of an equity method investment,which of the following is the auditor most likely to do?

An ___________________________________ is an approximation of a financial statement element,item,or account. Question also found in study guide

Derivative instruments include

Documenting ownership of bonds can be handled by a registrar and transfer agent.

All corporate capital stock transactions should ultimately be traced to the

A CUSIP number is used to identify loans taken from a bank.

An audit team testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the

Jones was engaged to examine the financial statements of Gamma Corporation for the year ended June 30.Having completed an examination of the investment securities,which of the following is the best method of verifying the accuracy of recorded dividend income?

A _____________________________ is a financial institution appointed to record the issuance and ownership of company securities. Question also found in study guide

The typical business activity of the finance and investment cycle would not include

Dividends received from stock investments can be verified by examing the company's cash receipts journal.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

Exam 10: Finance and Investment Cycle

Compensating controls in the finance and investment cycle

When fixed assets are acquired during the year under audit,auditors should inspect the assets.

The most significant inherent risk in the fiancé and investment cycle is the proper presentation of items on the balance sheet.

Documentation of a count of equity securities should include all of the following except

A client has a large and active investment portfolio that is kept in a bank safe deposit box.If the auditors are unable to count securities at the balance-sheet date,they most likely will

Investment transactions list on the monthly statement from the broker should be vouched to the broker's advice,proper authorization,and the cash accounts.

_______________________________ is responsible for making estimates and should have a _____________________________ and _____________________________ designed to reduce the likelihood of material misstatements in them. Question also found in study guide

Which of the following controls would be most effective in ensuring that the proper custody of assets in the investing cycle is maintained?

When auditing the valuation assertion of an equity method investment,which of the following is the auditor most likely to do?

An ___________________________________ is an approximation of a financial statement element,item,or account. Question also found in study guide

Derivative instruments include

Documenting ownership of bonds can be handled by a registrar and transfer agent.

All corporate capital stock transactions should ultimately be traced to the

A CUSIP number is used to identify loans taken from a bank.

An audit team testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the

Jones was engaged to examine the financial statements of Gamma Corporation for the year ended June 30.Having completed an examination of the investment securities,which of the following is the best method of verifying the accuracy of recorded dividend income?

A _____________________________ is a financial institution appointed to record the issuance and ownership of company securities. Question also found in study guide

The typical business activity of the finance and investment cycle would not include

Dividends received from stock investments can be verified by examing the company's cash receipts journal.

Auditing and Assurance Services

Professional Standards

Engagement Planning

Management Fraud and Audit Risk

Risk Assessment: Internal Control Evaluation

Employee Fraud and the Audit of Cash

Revenue and Collection Cycle

Acquisition and Expenditure Cycle

Production Cycle

Completing the Audit

Reports on Audited Financial Statements

Other Public Accounting Services

Professional Ethics

Legal Liability

Internal Audits governmental Audits and Fraud Examinations

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing and Information Technology

Filters

_________________ is responsible for making estimates and should have a _ and _______________ designed to reduce the likelihood of material misstatements in them. Question also found in study guide