Exam 22: Audit of the Capital Acquisition and Repayment Cycle

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.

Responsibility for the issuance of new notes payable would normally be vested in the:

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

Discuss the four key controls over notes payable.

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

The two most important balance related objectives in notes payable are:

The evidence obtained during the tests of details of balances helps the auditor satisfy the notes payable presentation and disclosure objectives.

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

The shareholders' capital stock master file is used as the basis for the payment of dividends and also acts as a check on the accuracy of the common stock balance in the general ledger.

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

What are two important internal control procedures that companies should implement to prevent misstatements in owners' equity when a company maintains its own records of stock transactions and outstanding stock?

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

Auditors seldom learn about the capital acquisition and repayment cycle when gaining an understanding of the client's business and industry.

The Securities and Exchange Commission requires companies listed on exchanges to employ stock transfer agents.

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

To determine if notes payable are included in the proper period,the auditor should:

State the four most important audit objectives for capital stock and describe how the auditor typically verifies each of the four objectives.

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

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