Question 1

The audit procedure "examine duplicate copies of notes payable to determine whether the notes payable were dated on or before the balance sheet date" is done for which of the following balance-related audit objective?

Accepted Answer

A)  Completeness 
B)  Cutoff 
C)  Detail tie-in 
D)  Existence

Question 2

When performing analytical procedures for notes payable,if actual interest expense is materially larger than the auditor's expectation,one possible cause would be interest payments on unrecorded notes payable.

Accepted Answer

A) True 
 B)False

Question 3

The starting point for the audit of notes payable is a schedule of notes payable and accrued interest.Discuss the information typically included in the schedule.

Accepted Answer

The answer of The starting point for the audit of...

Question 4

Discuss the four characteristics of the capital acquisition and repayment cycle that make it unique from other cycles.

Accepted Answer

The answer of Discuss the four characteristics of the capital...

Question 5

The auditor's independent estimate of interest expense from notes payable uses average interest rates and:

Accepted Answer

A)  average notes payable outstanding. 
B)  year-end notes payable outstanding. 
C)  only notes payable above the level of materiality. 
D)  only notes payable to major lenders.

Question 6

What are the two most important balance-related audit objectives in notes payable?

Accepted Answer

The answer of What are the two most important balance-related...

Question 7

Which of the following audit objectives is least important in the audit of capital stock and paid-in-capital in excess of par?

Accepted Answer

A)  Completeness 
B)  Accuracy 
C)  Rights and obligations 
D)  Presentation and disclosure

Question 8

In the audit of the transactions and amounts in the capital acquisitions and repayments cycle,the auditor must take great care in making sure that the significant legal requirements affecting the financial statements have been properly fulfilled and:

Accepted Answer

A)  any violations are reported to the SEC. 
B)  are adequately disclosed in the financial statements. 
C)  must issue a disclaimer if they haven't been fulfilled. 
D)  any departures from the agreements are made with management's knowledge and consent.

Question 9

When auditing the capital acquisition and repayment cycle,it is common to verify each transaction taking place in the cycle for the entire year as a part of verifying the balance sheet accounts.

Accepted Answer

A) True 
 B)False

Question 10

The accuracy of a dividend declaration can be audited by recalculating the amount on the basis of the dividend per share times the number of shares outstanding.

Accepted Answer

A) True 
 B)False

Question 11

Discuss the overall objectives of the audit of notes payable.

Accepted Answer

The answer of Discuss the overall objectives of the audit...

Question 12

If a company employs a capital stock registrar and/or transfer agent,the registrar or agent,or both,should be requested to confirm directly to the auditor the number of shares of each class of stock:

Accepted Answer

A)  surrendered and canceled during the year. 
B)  authorized at the balance sheet date. 
C)  issued and outstanding at the balance sheet date. 
D)  sold at a price above par during the year.

Question 13

Which of the following audit tests would provide evidence regarding the balance-related audit objective of existence for an audit of notes payable?

Accepted Answer

A)  Examine due dates on duplicate copies of notes. 
B)  Examine balance sheet for proper presentation and disclosure of notes payable. 
C)  Examine corporate minutes for loan approval. 
D)  Foot the notes payable list for notes payable and accrued interest.

Question 14

Which of the following types of owners' equity transactions would require authorization by the board of directors?

Accepted Answer

A)  Issuance of capital stock 
B)  Repurchase of capital stock 
C)  Declaration of dividends 
D)  All of the above

Question 15

All corporations must have a ________ account.

Accepted Answer

A)  preferred stock 
B)  common stock 
C)  paid-in capital in excess of par 
D)  dividends payable

Question 16

In the audit of notes payable,it is common to include tests of principal and interest payments as a part of the audit of the acquisitions and payment cycle because the payments are in the cash disbursements journal that is being sampled.It is also normal to test these transactions as part of the capital acquisitions and repayment cycle because:

Accepted Answer

A)  it is not unusual for the auditor to duplicate a process, thereby gathering a larger quantity of evidence. 
B)  replicating the evidence will provide the auditor with a higher level of assurance. 
C)  the tests done in the acquisitions and payments cycle will look only at the cash credit side so the tests done in the capital acquisitions and repayment cycle will look at the debit side of the transaction. 
D)  due to the infrequency of these transactions, in many cases no transactions involving notes payable are included in the sample tests of acquisitions and payments.

Question 17

All of the following are owners' equity accounts except for:

Accepted Answer

A)  common stock. 
B)  paid-in-capital in excess of par. 
C)  sales. 
D)  retained earnings.

Question 18

Any company with stock listed on a securities exchange is required to engage a(n)________.

Accepted Answer

A)  equity analyst 
B)  stock transfer agent 
C)  independent registrar 
D)  equity placement specialist

Question 19

Few large companies employ stock transfer agents,but small companies commonly do so.

Accepted Answer

A) True 
 B)False

Question 20

Most closely held corporations have numerous transactions during the year for capital stock accounts.

Accepted Answer

A) True 
 B)False

Exam 22: Audit of the Capital Acquisition and Repayment Cycle

The audit procedure "examine duplicate copies of notes payable to determine whether the notes payable were dated on or before the balance sheet date" is done for which of the following balance-related audit objective?

When performing analytical procedures for notes payable,if actual interest expense is materially larger than the auditor's expectation,one possible cause would be interest payments on unrecorded notes payable.

The starting point for the audit of notes payable is a schedule of notes payable and accrued interest.Discuss the information typically included in the schedule.

Discuss the four characteristics of the capital acquisition and repayment cycle that make it unique from other cycles.

The auditor's independent estimate of interest expense from notes payable uses average interest rates and:

What are the two most important balance-related audit objectives in notes payable?

Which of the following audit objectives is least important in the audit of capital stock and paid-in-capital in excess of par?

In the audit of the transactions and amounts in the capital acquisitions and repayments cycle,the auditor must take great care in making sure that the significant legal requirements affecting the financial statements have been properly fulfilled and:

When auditing the capital acquisition and repayment cycle,it is common to verify each transaction taking place in the cycle for the entire year as a part of verifying the balance sheet accounts.

The accuracy of a dividend declaration can be audited by recalculating the amount on the basis of the dividend per share times the number of shares outstanding.

Discuss the overall objectives of the audit of notes payable.

If a company employs a capital stock registrar and/or transfer agent,the registrar or agent,or both,should be requested to confirm directly to the auditor the number of shares of each class of stock:

Which of the following audit tests would provide evidence regarding the balance-related audit objective of existence for an audit of notes payable?

Which of the following types of owners' equity transactions would require authorization by the board of directors?

All corporations must have a ________ account.

All of the following are owners' equity accounts except for:

Any company with stock listed on a securities exchange is required to engage a(n) ________.

Few large companies employ stock transfer agents,but small companies commonly do so.

Most closely held corporations have numerous transactions during the year for capital stock accounts.