Question 1

It is easier to segregate functional responsibilities in middle management than in upper-level management.

Accepted Answer

A) True 
 B)False

Question 2

According to generally accepted auditing standards,the relevant aspects of a control system over the preparation of accounting estimates include:
 Identifying where accounting estimates are required.
 Gathering relevant,sufficient,and reliable data for the estimates.
 Developing assumptions about the estimates.
 Preparation of estimates by qualified personnel.
 Adequate review and approval by appropriate levels of authority.
 Comparison of previous estimates with actual results.
 Consideration by management of whether the accounting estimates are reasonable and consistent with the company's operational plans.
Required:
A)How would the auditor test controls over the preparation of accounting estimates?
B)What substantive audit procedures could the auditor use in testing the estimates?

Accepted Answer

A)An auditor uses inquiry and observatio

Question 3

The decision of a company to have a transfer agent handle the exchange of shares is related primarily to which functional responsibility?

Accepted Answer

A) Authorization. 
B) Custody. 
C) Record-keeping. 
D) Periodic reconciliation. 
A) Authorization. 
B) Custody. 
C) Record-keeping. 
D) Periodic reconciliation.

Question 4

What are the contributions that a board of directors can make to internal control?

Accepted Answer

i.Approving and monitoring mission,visio

Question 5

Name the typical specific management assertions relating to long-term liabilities.

Accepted Answer

i.All important long-term liabilities ar

Question 6

In the area of finance and investment,the involvement of two or more persons in each important functional responsibility could be considered a compensating control.

Accepted Answer

A) True 
 B)False

Question 7

If the auditor suspects that the financial statements are intentionally misstated,he or she should perform procedures to confirm or dispel that suspicion.

Accepted Answer

A) True 
 B)False

Question 8

A typical activity performed in the finance and investment cycle would be ________.

Accepted Answer

A) analysis of excess cash funds 
B) reconciliation of cash balances 
C) authorization of cash disbursements 
D) preparation of the cash flow statement 
A) analysis of excess cash funds 
B) reconciliation of cash balances 
C) authorization of cash disbursements 
D) preparation of the cash flow statement

Question 9

The sale of share capital and the decision to finance the company with debt are transactions usually authorized by shareholders.

Accepted Answer

A) True 
 B)False

Question 10

Letters of credit are an example of "off-balance-sheet" financing.

Accepted Answer

A) True 
 B)False

Question 11

It is very common for auditors to perform substantive procedures on 100% of the transactions and general ledger balances for investment accounts and finance accounts.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) All material long-term liabilities are recorded. 
B) Assumption of new long-term liabilities and repayment of debt are properly authorized. 
C) Terms,conditions,and restrictions relating to long-term debt are adequately disclosed. 
D) Disclosure of five-year repayment schedule and debt maturity dates is accurate and adequate. 
A) All material long-term liabilities are recorded. 
B) Assumption of new long-term liabilities and repayment of debt are properly authorized. 
C) Terms,conditions,and restrictions relating to long-term debt are adequately disclosed. 
D) Disclosure of five-year repayment schedule and debt maturity dates is accurate and adequate.

Question 13

Accounting estimates include which of the following?

Accepted Answer

A) Trade payable balances. 
B) Cash balances. 
C) Capital assets at cost. 
D) Amortization expense. 
A) Trade payable balances. 
B) Cash balances. 
C) Capital assets at cost. 
D) Amortization expense.

Question 14

The inherent risk associated with the finance and investment cycle is less than that associated with other cycles,especially given the low number of transactions typically involved.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following questions is an auditor most likely to include on an internal control questionnaire?

Accepted Answer

A) Are the assets that secure notes payable critically needed for the entity's continued existence? 
B) Are two or more authorized signatures required on cheques that repay notes payable? 
C) Are the proceeds from notes payable used for the purchase of non-current assets? 
D) Are direct borrowings on notes payable authorized by the board of directors? 
A) Are the assets that secure notes payable critically needed for the entity's continued existence? 
B) Are two or more authorized signatures required on cheques that repay notes payable? 
C) Are the proceeds from notes payable used for the purchase of non-current assets? 
D) Are direct borrowings on notes payable authorized by the board of directors?

Question 16

If an auditor decided to confirm share capital,the auditor would obtain the confirmation from ________.

Accepted Answer

A) management 
B) the board of directors 
C) shareholders 
D) an independent registrar 
A) management 
B) the board of directors 
C) shareholders 
D) an independent registrar

Question 17

The auditor's primary concern in the verification of long-term liabilities is that all liabilities are recorded and that the interest expense is properly paid or accrued.

Accepted Answer

A) True 
 B)False

Question 18

What is off-balance-sheet financing? Define the term and provide at least two examples.

Accepted Answer

Off-balance-sheet financing exists when

Question 19

What is a compensating control? Describe a compensating control in the finance and investment cycle.

Accepted Answer

A compensating control is an alternative

Question 20

Selecting a sample of paid notes and tracing interest costs to the general ledger expense account is a test of the control objective of ________.

Accepted Answer

A) accounting 
B) accuracy 
C) completeness 
D) validity 
A) accounting 
B) accuracy 
C) completeness 
D) validity

It is easier to segregate functional responsibilities in middle management than in upper-level management.

The decision of a company to have a transfer agent handle the exchange of shares is related primarily to which functional responsibility?

What are the contributions that a board of directors can make to internal control?

Name the typical specific management assertions relating to long-term liabilities.

In the area of finance and investment,the involvement of two or more persons in each important functional responsibility could be considered a compensating control.

If the auditor suspects that the financial statements are intentionally misstated,he or she should perform procedures to confirm or dispel that suspicion.

A typical activity performed in the finance and investment cycle would be ________.

The sale of share capital and the decision to finance the company with debt are transactions usually authorized by shareholders.

Letters of credit are an example of "off-balance-sheet" financing.

It is very common for auditors to perform substantive procedures on 100% of the transactions and general ledger balances for investment accounts and finance accounts.

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

Accounting estimates include which of the following?

The inherent risk associated with the finance and investment cycle is less than that associated with other cycles,especially given the low number of transactions typically involved.

Which of the following questions is an auditor most likely to include on an internal control questionnaire?

If an auditor decided to confirm share capital,the auditor would obtain the confirmation from ________.

The auditor's primary concern in the verification of long-term liabilities is that all liabilities are recorded and that the interest expense is properly paid or accrued.

What is off-balance-sheet financing? Define the term and provide at least two examples.

What is a compensating control? Describe a compensating control in the finance and investment cycle.

Selecting a sample of paid notes and tracing interest costs to the general ledger expense account is a test of the control objective of ________.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters

Exam 14: The Finance and Investment Process

It is easier to segregate functional responsibilities in middle management than in upper-level management.

The decision of a company to have a transfer agent handle the exchange of shares is related primarily to which functional responsibility?

What are the contributions that a board of directors can make to internal control?

Name the typical specific management assertions relating to long-term liabilities.

In the area of finance and investment,the involvement of two or more persons in each important functional responsibility could be considered a compensating control.

If the auditor suspects that the financial statements are intentionally misstated,he or she should perform procedures to confirm or dispel that suspicion.

A typical activity performed in the finance and investment cycle would be ________.

The sale of share capital and the decision to finance the company with debt are transactions usually authorized by shareholders.

Letters of credit are an example of "off-balance-sheet" financing.

It is very common for auditors to perform substantive procedures on 100% of the transactions and general ledger balances for investment accounts and finance accounts.

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

Accounting estimates include which of the following?

The inherent risk associated with the finance and investment cycle is less than that associated with other cycles,especially given the low number of transactions typically involved.

Which of the following questions is an auditor most likely to include on an internal control questionnaire?

If an auditor decided to confirm share capital,the auditor would obtain the confirmation from ________.

The auditor's primary concern in the verification of long-term liabilities is that all liabilities are recorded and that the interest expense is properly paid or accrued.

What is off-balance-sheet financing? Define the term and provide at least two examples.

What is a compensating control? Describe a compensating control in the finance and investment cycle.

Selecting a sample of paid notes and tracing interest costs to the general ledger expense account is a test of the control objective of ________.

Introduction to Auditing

Auditors Professional Roles and Responsibilities

Auditors Ethical and Legal Responsibilities

Reports on Audited Financial Statements

Preliminary Audit Planning: Understanding the Auditees Business

Assessing Risks in an Audit Engagement

Internal Control Over Financial Reporting

Audit Evidence and Assurance

Control Assessment and Testing

Audit Sampling

The Revenues, Receivables, and Receipts Process and Cash Account Balance

The Purchases, Payables, and Payments Process

Payroll and Production Processes

hapter 15 Completing the Audit Work

Applying Professional Judgment to Form the Audit Opinion and Issue the Audit Report

Other Public Accounting Services and Reportsreviews and Compilations

Professional Rules of Conduct Details and Auditor Responsibilities

The Audit of Accounting Estimates: Basic Material Relating to Accounting Estimates

Legal Liability Cases

Other Professional Accounting Services and Reports, Including Fraud Auditing

Filters