CHAPTER 15
MULTIPLE CHOICE
d 1.A company holds bearer bonds as a short-term investment. Responsibility for custody of these
bonds and submission of coupons for periodic interest collections probably should be delegated to
the
a.Chief accountant.
b.Internal auditor.
c.Cashier.
d.Treasurer. (AICPA ADAPTED)
b 2.Of the following, which is the most efficient audit procedure for testing accrued interest earned
on bond investments?
a.Tracing interest declarations to an independent record book.
b.Recomputing interest earned.
c.Confirming interest rate with the issuer of the bonds.
d.Vouching the receipt and deposit of interest checks.(AICPA ADAPTED)
d 3.During the audit of a publicly held company, the auditor could obtain written confirmation
regarding long-term bond transactions from the
a.Bond holders.
b.Client's attorney.
c.Internal auditors.
d.Trustee. (AICPA ADAPTED)
b 4.The auditor's program for examining long-term debt should include
a.Verification of the existence of the bondholders.
b.Examination of any bond trust agreement.
c.Inspection of the accounts payable subsidiary ledger.
d.Investigation of credits to the bond interest income account.(AICPA ADAPTED)
d 5.Jones was engaged to audit the financial statements of Gamma Corporation, a June 30 year-end
client. Having completed testing of the investment securities, which of the following is the best
method of verifying the accuracy of recorded dividend income?
a.Tracing recorded dividend income to cash receipts records and validated deposit slips.
b.Utilizing analytical review techniques and statistical sampling.
c.Comparing recorded dividends with amounts appearing on Federal Information Form 1099.
d. Comparing recorded dividends with a standard financial reporting service's record of dividends.
(AICPA ADAPTED)
a6.A company has temporarily excess funds to invest. The board of directors decided to purchase
marketable securities and assigned the future purchase and sale decisions to a responsible
financial executive. The best person(s) to make periodic reviews of the investment activity would
be
a.The investment committee of the board of directors.
b.The treasurer.
c.The corporate controller.
d. The chief operating officer of the company.(AICPA ADAPTED)
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