Exam 15: Auditing the Financinginvesting Process: Long-Term Liabilities, Stockholders Equity, and Income Statement Accounts

An auditor compares revenues and expenses reported for the year being audited (current year)with those of the prior year and investigates all changes exceeding 10%.By this procedure,the auditor would be most likely to learn that

During the year under audit,a company has completed a private placement of a substantial amount of bonds.Which of the following is the most important step in the auditor's program for the audit of bonds payable?

Identify the three major types of transactions that occur in stockholders' equity.

In performing tests concerning the granting of stock options,an auditor should

For each of the following substantive procedures,first note whether it is a test of details of transactions or a test of details of account balances.Then decide for which assertion the test provides the best evidence. 1.Trace large cash receipts and payments to the source documents and the general ledger. 2.Examine copies of note and bond agreements. 3.Recompute accrued interest payable. 4.Review debt activity for a few days before and after year-end to determine whether transactions are included in the proper period. 5.Examine due dates on notes and bonds for proper classification between current and long term debt.

An audit of stockholders' equity ordinarily should include

A control which ensures that long-term borrowing is properly initiated by appropriate individuals addresses the control assertion of

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

The registrar is responsible for preparing stock certificates and maintaining adequate stockholders' records.

When auditing capital stock accounts,the cutoff assertion is the most important to consider.

In the audit of a medium-sized manufacturing concern,which one of the following areas can be expected to require the least amount of audit time?

All corporate capital stock transactions should ultimately be traced to the

Reviewing notes paid or renewed after the balance sheet date to determine if there are unrecorded liabilities at year-end can be used to test the assertion of

Substantive analytical procedures can be used extensively to test revenue and expense accounts.

Generally,all dividends that are declared and paid will be audited.

Overall analysis of income statement accounts may bring to light errors,omissions,and inconsistencies not disclosed in the overall analysis of balance sheet accounts.The income statement analysis can best be accomplished by comparing monthly

Match each of the following controls with the assertion for long-term debt that it supports.

Before expressing an opinion concerning the results of operations,the auditor would most likely proceed with the examination of the income statement by

One major issue associated with long-term debt is the classification of the short-term portion of long-term debt that is due in the next year.

Income statement accounts must be accounted for in accordance with GAAP.