Exam 10: Finance and Investment Cycle

"Are interest payments and accruals monitored for due dates and financial statement dates?" is an internal control questionnaire item that is related to the ASB transaction assertion of

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Question 1

Correct Answer:

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According to auditing standards,specific relevant aspects of an internal control system for making estimates include: • Management communication of the need for proper accounting estimates. • Accumulation of relevant,sufficient,and reliable data for estimates. • Preparation of estimates by qualified personnel. • Adequate review and approval by appropriate levels of authority. • Comparison of prior estimates with subsequent results to assess the reliability of the estimation outcomes. • Consideration by management of whether particular accounting estimates are consistent with the company's operational plans. Required: a.How would the auditor test these control activities over the production of estimates? b.What substantive audit procedures would the auditor use to test the accounting estimates?

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Question 2

Correct Answer:

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a.An auditor would primarily use inquiries and observations to test controls over the production of estimates.Such inquires would include determining who prepares estimates,when are they prepared,what data are used,who reviews and approves the estimates,have you compared prior estimates with subsequent actual events? Observations include the study of (1)data documentation, (2)comparisons of prior estimates with subsequent actual experience,and (3)intercompany correspondence concerning estimates and operational plans. b.Beyond tests of controls,substantive audit procedures include recalculating the mathematical estimate,developing an auditor's own independent estimate based on alternative assumptions,and comparing the estimate to subsequently discovered facts to the extent they are known before the end of the fieldwork.

When stock is used in exchange for tangible assets,the auditor should inspect the assets to ensure the assets exist.

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(True/False)

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Question 3

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True

The counting of stock certificates held by the company must be done after the balance sheet date to ensure the investments exist at the balance sheet date.

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Question 4

Appropriate audit inquiries regarding estimates include all of the following except:

(Multiple Choice)

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Question 5

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

(Multiple Choice)

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Question 6

Investment accounting may be on the _______________ method,_ method,or _______________ method. Question also found in study guide

(Short Answer)

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Question 7

Loan covenants are used for which of the following reasons?

(Multiple Choice)

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Question 8

Records of stock and bond certificates are usually maintained by the company's

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Question 9

Bank confirmation requests should only include balances for cash accounts.

(True/False)

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Question 10

If a company keeps investments in a bank safe deposit box,which of the following two people ideally should have access to the safe deposit box?

(Multiple Choice)

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Question 11

When auditing the market value of an investment,an auditor would be least likely to

(Multiple Choice)

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Question 12

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

(Multiple Choice)

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Question 13

When an entity uses a trust company as custodian of its marketable securities,the possibility of concealing fraud most likely would be reduced if the

(Multiple Choice)

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Question 14

In auditing intangible assets,an auditor most likely would review or recompute amortization and determine whether the amortization period is reasonable in support of the ASB balance assertion of

(Multiple Choice)

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Question 15

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

(Multiple Choice)

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Question 16

If it would be appropriate to confirm capital stock,the auditor would obtain the confirmation from

(Multiple Choice)

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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

(Multiple Choice)

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Question 18

In order to check for unrecorded loans in the finance and investment cycle,auditors should search for large cash transactions in the cash receipts journal.

(True/False)

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Question 19

A ______________________________ is a control feature relied upon when a standard internal control procedure is not in place. Question also found in study guide

(Short Answer)

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Question 20

Showing 1 - 20 of 116

"Are interest payments and accruals monitored for due dates and financial statement dates?" is an internal control questionnaire item that is related to the ASB transaction assertion of

When stock is used in exchange for tangible assets,the auditor should inspect the assets to ensure the assets exist.

The counting of stock certificates held by the company must be done after the balance sheet date to ensure the investments exist at the balance sheet date.

Appropriate audit inquiries regarding estimates include all of the following except:

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

Investment accounting may be on the _______________ method,_ method,or _______________ method. Question also found in study guide

Loan covenants are used for which of the following reasons?

Records of stock and bond certificates are usually maintained by the company's

Bank confirmation requests should only include balances for cash accounts.

If a company keeps investments in a bank safe deposit box,which of the following two people ideally should have access to the safe deposit box?

When auditing the market value of an investment,an auditor would be least likely to

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

When an entity uses a trust company as custodian of its marketable securities,the possibility of concealing fraud most likely would be reduced if the

In auditing intangible assets,an auditor most likely would review or recompute amortization and determine whether the amortization period is reasonable in support of the ASB balance assertion of

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

If it would be appropriate to confirm capital stock,the auditor would obtain the confirmation from

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

In order to check for unrecorded loans in the finance and investment cycle,auditors should search for large cash transactions in the cash receipts journal.

A ______________________________ is a control feature relied upon when a standard internal control procedure is not in place. Question also found in study guide

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

"Are interest payments and accruals monitored for due dates and financial statement dates?" is an internal control questionnaire item that is related to the ASB transaction assertion of

When stock is used in exchange for tangible assets,the auditor should inspect the assets to ensure the assets exist.

The counting of stock certificates held by the company must be done after the balance sheet date to ensure the investments exist at the balance sheet date.

Appropriate audit inquiries regarding estimates include all of the following except:

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

Investment accounting may be on the _____________________________ method,_____________________________ method,or _____________________________ method. Question also found in study guide

Loan covenants are used for which of the following reasons?

Records of stock and bond certificates are usually maintained by the company's

Bank confirmation requests should only include balances for cash accounts.

If a company keeps investments in a bank safe deposit box,which of the following two people ideally should have access to the safe deposit box?

When auditing the market value of an investment,an auditor would be least likely to

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

When an entity uses a trust company as custodian of its marketable securities,the possibility of concealing fraud most likely would be reduced if the

In auditing intangible assets,an auditor most likely would review or recompute amortization and determine whether the amortization period is reasonable in support of the ASB balance assertion of

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

If it would be appropriate to confirm capital stock,the auditor would obtain the confirmation from

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

In order to check for unrecorded loans in the finance and investment cycle,auditors should search for large cash transactions in the cash receipts journal.

A ______________________________ is a control feature relied upon when a standard internal control procedure is not in place. Question also found in study guide

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

Investment accounting may be on the _______________ method,_ method,or _______________ method. Question also found in study guide