Question 1

Which of the following audit procedures would not likely be performed for audits of shareholders' equity?

Accepted Answer

A)  Read board of directors' minutes for authorization of equity transactions. 
B)  Confirm outstanding common and preferred stock with stock registrar. 
C)  Compare valuation of stock to published market prices. 
D)  Obtain management representation about number of shares issued and outstanding. 
A)  Read board of directors' minutes for authorization of equity transactions. 
B)  Confirm outstanding common and preferred stock with stock registrar. 
C)  Compare valuation of stock to published market prices. 
D)  Obtain management representation about number of shares issued and outstanding.

Question 2

When a company keeps its own stock records,which of the following procedures is not required?

Accepted Answer

A)  Confirm outstanding common stock with stock registrar agent. 
B)  Inspect the stock record stubs for certificate numbers and number of shares. 
C)  Inspect the unissued certificates. 
D)  Obtain written representation about the number of shares issued and outstanding. 
A)  Confirm outstanding common stock with stock registrar agent. 
B)  Inspect the stock record stubs for certificate numbers and number of shares. 
C)  Inspect the unissued certificates. 
D)  Obtain written representation about the number of shares issued and outstanding.

Question 3

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 4

In the audit of notes payable,an auditor testing the ASB balance assertion of accuracy and valuation most likely would

Accepted Answer

A)  Read directors' and finance committee's minutes for authorization of financing transactions. 
B)  Select a sample of paid notes and trace interest expense to the general ledger account. 
C)  Select a sample of paid notes and recalculate interest expense for the period under audit. 
D)  Select a sample of notes payable and vouch cash receipt to the bank statement. 
A)  Read directors' and finance committee's minutes for authorization of financing transactions. 
B)  Select a sample of paid notes and trace interest expense to the general ledger account. 
C)  Select a sample of paid notes and recalculate interest expense for the period under audit. 
D)  Select a sample of notes payable and vouch cash receipt to the bank statement.

Question 5

Sales of capital stock and debt financing transactions usually are authorized by the board of directors.

Accepted Answer

A) True 
 B)False

Question 6

Which ASB balance assertion is of the most importance to auditors for long-term liabilities?

Accepted Answer

A)  Existence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Valuation. 
A)  Existence. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Valuation.

Question 7

What are "off-balance-sheet" financing transactions? Explain and provide two or more examples.

Accepted Answer

"Off-balance-sheet" financing transactio

Question 8

Which of the following audit procedures would not likely be performed for audits of investments?

Accepted Answer

A)  Read board of directors' minutes for authorization of investment strategies. 
B)  Confirm investments with registrar. 
C)  Confirm investments with broker or trustee. 
D)  Compare valuation to published market prices. 
A)  Read board of directors' minutes for authorization of investment strategies. 
B)  Confirm investments with registrar. 
C)  Confirm investments with broker or trustee. 
D)  Compare valuation to published market prices.

Question 9

The most significant reconciliation opportunities in the investment and intangible accounts are confirmation with brokers and the inspection and count of negotiable securities certificates.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following would not be a typical feature of management's control over the production of estimates?

Accepted Answer

A)  Accumulation of relevant, sufficient, and reliable data. 
B)  Preparation of estimates by qualified personnel. 
C)  Review by the independent auditor. 
D)  Consideration by management of whether particular accounting estimates are consistent with the company's operational plans. 
A)  Accumulation of relevant, sufficient, and reliable data. 
B)  Preparation of estimates by qualified personnel. 
C)  Review by the independent auditor. 
D)  Consideration by management of whether particular accounting estimates are consistent with the company's operational plans.

Question 11

Reliance on controls normally reduces the extent of substantive audit procedures on finance and investment cycle accounts.

Accepted Answer

A) True 
 B)False

Question 12

During an audit of an entity's stockholders' equity accounts,the auditor determines whether there are restrictions on retained earnings resulting from loans,agreements,or state law.This audit procedure most likely is intended to verify the ASB presentation and disclosure assertion of

Accepted Answer

A)  Occurrence. 
B)  Completeness. 
C)  Rights and Obligations. 
D)  Understandability. 
A)  Occurrence. 
B)  Completeness. 
C)  Rights and Obligations. 
D)  Understandability.

Question 13

A related party is a person or entity that

Accepted Answer

A)  Has a family tie to a management member. 
B)  Does business with the company. 
C)  Can exert significant influence over or be influenced by the company. 
D)  Is a member of the company's management. 
A)  Has a family tie to a management member. 
B)  Does business with the company. 
C)  Can exert significant influence over or be influenced by the company. 
D)  Is a member of the company's management.

Question 14

A ___________________________ approved by the board of directors constitutes the authorization for capital asset acquisitions and investments.

Accepted Answer

The answer of A ___________________________ approved by the board of...

Question 15

If the auditors discover that the carrying amount of a client's investments is overstated because of a loss in value that is other than a temporary decline in market value,they should insist that

Accepted Answer

A)  The approximate market value of the investments be shown in parentheses on the face of the balance sheet. 
B)  The investments be classified as long term for balance-sheet purposes with full disclosure in the footnotes. 
C)  The loss in value be recognized in the financial statements. 
D)  The equity section of the balance sheet separately show a charge equal to the amount of the loss. 
A)  The approximate market value of the investments be shown in parentheses on the face of the balance sheet. 
B)  The investments be classified as long term for balance-sheet purposes with full disclosure in the footnotes. 
C)  The loss in value be recognized in the financial statements. 
D)  The equity section of the balance sheet separately show a charge equal to the amount of the loss.

Question 16

Related party transactions

Accepted Answer

A)  Must be valued as if they were arm's length. 
B)  Must be assumed to be valued differently than if they were arm's length. 
C)  Must be disclosed in the financial statements. 
D)  Must be disclosed in the financial statements and the auditor's report. 
A)  Must be valued as if they were arm's length. 
B)  Must be assumed to be valued differently than if they were arm's length. 
C)  Must be disclosed in the financial statements. 
D)  Must be disclosed in the financial statements and the auditor's report.

Question 17

An audit team's purpose in reviewing the documentation concerning the renewal of a note payable shortly after the balance-sheet date most likely is to obtain evidence concerning management's assertions about

Accepted Answer

A)  Existence. 
B)  Valuation. 
C)  Completeness. 
D)  Classification. 
A)  Existence. 
B)  Valuation. 
C)  Completeness. 
D)  Classification.

Question 18

The balance-sheet classification of investments by management should be confirmed with outside parties.

Accepted Answer

A) True 
 B)False

Question 19

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 20

The focus of controls in the finance and investment cycle is on

Accepted Answer

A)  Proper authorizations and competent personnel. 
B)  Computer controls over transactions. 
C)  Physical security of assets. 
D)  Prenumbered documents. 
A)  Proper authorizations and competent personnel. 
B)  Computer controls over transactions. 
C)  Physical security of assets. 
D)  Prenumbered documents.

Which of the following audit procedures would not likely be performed for audits of shareholders' equity?

When a company keeps its own stock records,which of the following procedures is not required?

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

In the audit of notes payable,an auditor testing the ASB balance assertion of accuracy and valuation most likely would

Sales of capital stock and debt financing transactions usually are authorized by the board of directors.

Which ASB balance assertion is of the most importance to auditors for long-term liabilities?

What are "off-balance-sheet" financing transactions? Explain and provide two or more examples.

Which of the following audit procedures would not likely be performed for audits of investments?

The most significant reconciliation opportunities in the investment and intangible accounts are confirmation with brokers and the inspection and count of negotiable securities certificates.

Which of the following would not be a typical feature of management's control over the production of estimates?

Reliance on controls normally reduces the extent of substantive audit procedures on finance and investment cycle accounts.

During an audit of an entity's stockholders' equity accounts,the auditor determines whether there are restrictions on retained earnings resulting from loans,agreements,or state law.This audit procedure most likely is intended to verify the ASB presentation and disclosure assertion of

A related party is a person or entity that

A ___________________________ approved by the board of directors constitutes the authorization for capital asset acquisitions and investments.

If the auditors discover that the carrying amount of a client's investments is overstated because of a loss in value that is other than a temporary decline in market value,they should insist that

Related party transactions

An audit team's purpose in reviewing the documentation concerning the renewal of a note payable shortly after the balance-sheet date most likely is to obtain evidence concerning management's assertions about

The balance-sheet classification of investments by management should be confirmed with outside parties.

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?

The focus of controls in the finance and investment cycle is on

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 Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters

Exam 10: Finance and Investment Cycle

Which of the following audit procedures would not likely be performed for audits of shareholders' equity?

When a company keeps its own stock records,which of the following procedures is not required?

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

In the audit of notes payable,an auditor testing the ASB balance assertion of accuracy and valuation most likely would

Sales of capital stock and debt financing transactions usually are authorized by the board of directors.

Which ASB balance assertion is of the most importance to auditors for long-term liabilities?

What are "off-balance-sheet" financing transactions? Explain and provide two or more examples.

Which of the following audit procedures would not likely be performed for audits of investments?

The most significant reconciliation opportunities in the investment and intangible accounts are confirmation with brokers and the inspection and count of negotiable securities certificates.

Which of the following would not be a typical feature of management's control over the production of estimates?

Reliance on controls normally reduces the extent of substantive audit procedures on finance and investment cycle accounts.

During an audit of an entity's stockholders' equity accounts,the auditor determines whether there are restrictions on retained earnings resulting from loans,agreements,or state law.This audit procedure most likely is intended to verify the ASB presentation and disclosure assertion of

A related party is a person or entity that

A ___________________________ approved by the board of directors constitutes the authorization for capital asset acquisitions and investments.

If the auditors discover that the carrying amount of a client's investments is overstated because of a loss in value that is other than a temporary decline in market value,they should insist that

Related party transactions

An audit team's purpose in reviewing the documentation concerning the renewal of a note payable shortly after the balance-sheet date most likely is to obtain evidence concerning management's assertions about

The balance-sheet classification of investments by management should be confirmed with outside parties.

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?

The focus of controls in the finance and investment cycle is on

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 Governmental and Fraud Audits

Overview of Sampling

Attributes Sampling

Variables Sampling

Auditing in a Computerized Environment

Filters