Question 1

Keeping track of securities owners for payment of interest or dividends is usually done by the company's

Accepted Answer

A) treasurer. 
B) broker. 
C) transfer agent. 
D) registrar. 
A) treasurer. 
B) broker. 
C) transfer agent. 
D) registrar.

Question 2

Which of the following approaches is most suitable for auditing the finance and investment cycle?

Accepted Answer

A) Perform extensive tests of controls and limit substantive procedures to analytical procedures. 
B) Ignore internal controls and perform extensive substantive procedures. 
C) Gain an understanding of internal controls and perform extensive substantive procedures. 
D) Ignore internal controls and limit substantive procedures to analytical procedures. 
A) Perform extensive tests of controls and limit substantive procedures to analytical procedures. 
B) Ignore internal controls and perform extensive substantive procedures. 
C) Gain an understanding of internal controls and perform extensive substantive procedures. 
D) Ignore internal controls and limit substantive procedures to analytical procedures.

Question 3

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 4

In an audit test of recorded interest expense and accrued interest,the auditor was able to detect that the recorded interest expense was higher than the calculations showed.This may indicate

Accepted Answer

A) a failure to accrue interest occurred. 
B) interest payments are in default. 
C) interest payments were charged to another account. 
D) interest was paid on an unknown debt or unrecorded liability. 
A) a failure to accrue interest occurred. 
B) interest payments are in default. 
C) interest payments were charged to another account. 
D) interest was paid on an unknown debt or unrecorded liability.

Question 5

Which of the following management assertions for long-term liabilities is related to the ASB balance assertion of completeness?

Accepted Answer

A) All material long-term liabilities are recorded. 
B) New long-term liabilities and debt extinguishments are properly authorized. 
C) Terms,conditions,and restrictions relating to noncurrent debt are adequately disclosed. 
D) Disclosures of maturities for the next five years are accurate and adequate. 
A) All material long-term liabilities are recorded. 
B) New long-term liabilities and debt extinguishments are properly authorized. 
C) Terms,conditions,and restrictions relating to noncurrent debt are adequately disclosed. 
D) Disclosures of maturities for the next five years are accurate and adequate.

Question 6

Sales of capital stock and debt financing transactions usually are authorized by Chief financial officer.

Accepted Answer

A) True 
 B)False

Question 7

When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records,canceled stock certificates should

Accepted Answer

A) be defaced to prevent reissuance and attached to their corresponding stubs. 
B) not be defaced but be segregated from other stock certificates and retained in a canceled certificates file. 
C) be destroyed to prevent fraudulent reissuance. 
D) be defaced and sent to the secretary of state. 
A) be defaced to prevent reissuance and attached to their corresponding stubs. 
B) not be defaced but be segregated from other stock certificates and retained in a canceled certificates file. 
C) be destroyed to prevent fraudulent reissuance. 
D) be defaced and sent to the secretary of state.

Question 8

For each of the internal control questions for notes payable,indicate by letter the related ASB transaction assertion.Answers may be used more than once.

$\begin{array}{lccc}
\text {--- } & \text {1. Are paid notes canceled, stamped PAID, and } &  \
\text {---} & \text { filed? } & \text { A. Valuation or allocation }  \
\text {--- } & \text { 2. Are bank due notices compared with records} &\
\text { ---} & \text { of unpaid liabilities? } &  \text { B. Oecurrence }  \
\text { ---} & \text { 3. Are notes payable kept by someone who cannot } &  \
\text { ---} & \text { sign notes or checks?} & \text { C. Completeness  }  \
\text { ---} & \text { 4. Is all borrowing authorization by the directors } &  \
\text { ---} & \text { checked to determine whether all notes payable } & \
\text { ---} & \text { are recorded?} & \text {D. Rights  }  \
\end{array}$

Accepted Answer

The answer of For each of the internal control questions...

Question 9

The board of directors authorizes and executes all investment purchases and sales.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

An agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture is called a

Accepted Answer

A) registrar. 
B) transfer agent. 
C) trustee. 
D) none of the above. 
A) registrar. 
B) transfer agent. 
C) trustee. 
D) none of the above.

Question 12

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 13

The typical assertions related to investments and related accounts would not include the PCAOB assertion that

Accepted Answer

A) capitalized intangible costs relate to intangibles acquired in exchange transactions. 
B) amortization is properly calculated. 
C) research and development costs are properly classified. 
D) goodwill is valued at market value. 
A) capitalized intangible costs relate to intangibles acquired in exchange transactions. 
B) amortization is properly calculated. 
C) research and development costs are properly classified. 
D) goodwill is valued at market value.

Question 14

The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense in the financial statements is to

Accepted Answer

A) evaluate internal control over securities. 
B) determine the validity of prepaid interest expense. 
C) ascertain the reasonableness of imputed interest. 
D) detect unrecorded liabilities. 
A) evaluate internal control over securities. 
B) determine the validity of prepaid interest expense. 
C) ascertain the reasonableness of imputed interest. 
D) detect unrecorded liabilities.

Question 15

An audit plan for the examination of the retained earnings account should include a step that requires verification of the

Accepted Answer

A) market value used to charge retained earnings to account for a 2-for-1 stock split. 
B) approval of the adjustment to the beginning balance as a result of a write-down of account receivables. 
C) authorization for both cash and stock dividends. 
D) dividends received from investments. 
A) market value used to charge retained earnings to account for a 2-for-1 stock split. 
B) approval of the adjustment to the beginning balance as a result of a write-down of account receivables. 
C) authorization for both cash and stock dividends. 
D) dividends received from investments.

Question 16

A transfer agent

Accepted Answer

A) keeps the stockholder list and,from time to time,determines the shareholders eligible to receive dividends. 
B) handles the exchange of shares,canceling the shares surrendered by sellers and issuing new certificates. 
C) records notes and bonds payable. 
D) makes investment decisions for an entity. 
A) keeps the stockholder list and,from time to time,determines the shareholders eligible to receive dividends. 
B) handles the exchange of shares,canceling the shares surrendered by sellers and issuing new certificates. 
C) records notes and bonds payable. 
D) makes investment decisions for an entity.

Question 17

_________________________________ transactions are obligations and commitments that are not required to be recorded.
Question also found in study guide

Accepted Answer

Off-balanc

Question 18

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 19

To determine whether facts support management's intent to hold securities to maturity,an auditor might

Accepted Answer

A) study the entity's cash flow forecasts. 
B) obtain published market quotations. 
C) compare fair value of the securities to cost. 
D) confirm that the securities are held by a broker. 
A) study the entity's cash flow forecasts. 
B) obtain published market quotations. 
C) compare fair value of the securities to cost. 
D) confirm that the securities are held by a broker.

Question 20

Which of the following is not a substantive audit procedure for estimates of management?

Accepted Answer

A) Recalculating the mathematical estimate. 
B) Observing whether estimates are prepared by qualified personnel. 
C) Developing an independent estimate based on alternative assumptions. 
D) Comparing the estimates of management to subsequently discovered facts before the end of fieldwork. 
A) Recalculating the mathematical estimate. 
B) Observing whether estimates are prepared by qualified personnel. 
C) Developing an independent estimate based on alternative assumptions. 
D) Comparing the estimates of management to subsequently discovered facts before the end of fieldwork.

Keeping track of securities owners for payment of interest or dividends is usually done by the company's

Which of the following approaches is most suitable for auditing the finance and investment cycle?

A related party is a person or entity that

In an audit test of recorded interest expense and accrued interest,the auditor was able to detect that the recorded interest expense was higher than the calculations showed.This may indicate

Which of the following management assertions for long-term liabilities is related to the ASB balance assertion of completeness?

Sales of capital stock and debt financing transactions usually are authorized by Chief financial officer.

When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records,canceled stock certificates should

The board of directors authorizes and executes all investment purchases and sales.

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

An agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture is called a

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

The typical assertions related to investments and related accounts would not include the PCAOB assertion that

The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense in the financial statements is to

An audit plan for the examination of the retained earnings account should include a step that requires verification of the

A transfer agent

_________________________________ transactions are obligations and commitments that are not required to be recorded. Question also found in study guide

Compensating controls in the finance and investment cycle

To determine whether facts support management's intent to hold securities to maturity,an auditor might

Which of the following is not a substantive audit procedure for estimates of management?

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

Keeping track of securities owners for payment of interest or dividends is usually done by the company's

Which of the following approaches is most suitable for auditing the finance and investment cycle?

A related party is a person or entity that

In an audit test of recorded interest expense and accrued interest,the auditor was able to detect that the recorded interest expense was higher than the calculations showed.This may indicate

Which of the following management assertions for long-term liabilities is related to the ASB balance assertion of completeness?

Sales of capital stock and debt financing transactions usually are authorized by Chief financial officer.

When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records,canceled stock certificates should

The board of directors authorizes and executes all investment purchases and sales.

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

An agent of a bond issuer who handles the administrative aspects of a loan and ensures that the borrower complies with the terms of the bond indenture is called a

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

The typical assertions related to investments and related accounts would not include the PCAOB assertion that

The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense in the financial statements is to

An audit plan for the examination of the retained earnings account should include a step that requires verification of the

A transfer agent

_________________________________ transactions are obligations and commitments that are not required to be recorded. Question also found in study guide

Compensating controls in the finance and investment cycle

To determine whether facts support management's intent to hold securities to maturity,an auditor might

Which of the following is not a substantive audit procedure for estimates of management?

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