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Auditing and Assurance Services, 14e (Arens) 2) The capital acquisition and repayment cycle does not include: Answer: C 3) Which of the following statements regarding the capital acquisition and repayment cycle is most 4) The primary audit objectives to focus on when auditing debt are: 1 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall To 5) Tolerable misstatement is often set at a(n) ________ level for notes payable. 6) When auditing interest-bearing debt, the auditor should ________ verify the related interest expense C) simultaneously 7) Assessed control risk and results of substantive tests of transactions are normally unimportant for 8) In the audit of the transactions and amounts in the capital acquisitions and repayments cycle, the Diff: Moderate 2 To 9) Describe the methodology for designing tests of details of balances for notes payable. Terms: Methodology for designing tests of details of balances for notes payable 10) Discuss the four characteristics of the capital acquisition and repayment cycle that make it unique 3 To andTB 11) List six accounts in the capital acquisition and repayment cycle commonly
found on balance sheets. Diff: Challenging 12) One unique characteristic of the capital acquisition and repayment cycle is that relatively few 13) Auditors seldom learn about the capital acquisition and repayment cycle when gaining an 4 To downloadmore 14) When auditing the capital acquisition and repayment cycle, it is common to verify each transaction Learning Objective 22-2 Diff: Easy 2) Responsibility for the issuance of new notes payable would normally be vested in the: 3) An auditor is determining whether an issuance of notes payable for cash was correctly recorded. Her 5 To 4) The auditor's independent estimate of
interest expense from notes payable uses average interest rates 5) The tests of details of balances procedure which requires the auditor
to trace the totals of the notes D) completeness. 6) The audit objective to determine that notes payable in the schedule actually exist is verified by the test 7) An auditor's substantive analytical procedure provides the auditor with an interest expense amount AACSB: Reflective thinking skills 6 To 8) You are auditing the long-term notes payable account for a client. Which of the following audit 9) The two most important balance related audit
objectives for notes payable are: 10) Which of the following audit tests would provide evidence regarding the balance-related audit 11)
Which of the following balance-related audit objectives is not applicable to the audit of notes payable? Terms: Balance-related audit objectives not related to audit of notes payable 7 To 12) When there are not numerous transactions involving notes payable during the year, the normal Objective: LO 22-2 13) The tests of details of balances procedure which requires the auditor to examine notes paid after yearend to determine whether they were liabilities at the balance sheet date is an attempt to satisfy the audit 14) The audit objective that requires that existing notes payable be included in the notes payable schedule 15) The audit objective that requires the auditor to determine that notes payable on the notes payable A) confirm notes payable. 8 To 16) During the course of an audit, a CPA observes that the recorded interest expense seems to be B) discount on bonds payable is overstated. 17) A company issued long-term notes payable for cash during the year under audit. To ascertain that 18) In the audit of notes payable, it is common to include tests of principal and interest payments as a part included in the sample tests of acquisitions and
payments. 9 To 19) Which of the following is not an
important control over notes payable? Diff: Challenging 20) The audit procedure "examine duplicate copies of notes payable to determine
whether the notes 21) The two most important balance related objectives in notes payable are: 22) Why are analytical procedures essential for notes payable? Terms:
Analytical procedures for notes payable 23) What are the two most important balance-related audit objectives in notes payable? 10 To 24) Identify three analytical procedures commonly performed for notes payable. 25) The starting point for the audit of notes payable is a schedule of notes payable and accrued interest. 26)
You are employing tests of details of balances for notes payable and interest expense. Describe below Diff: Moderate detail tie-in and existence balance-related audit objectives 11 To 27) Discuss the four key controls over notes payable. they become due, in the same manner in which it prepares checks for acquisitions of goods and services. 28) Discuss the overall objectives of the audit of
notes payable. 29) Notes payable are generally for short periods of time. Objective: LO 22-2 12 To 30) When performing analytical procedures for notes payable, if actual interest expense is materially 31) The balance-related audit objective realizable value is not applicable when auditing notes
payable. 32) The three most important balance-related audit objectives for notes payable are existence, realizable 33) The audit procedure "Foot the notes payable list and trace the totals to the general ledger" is 34) The audit procedure "Examine notes payable, minutes, and bank confirmations for restrictions" is performed when verifying the classification objective for notes payable. 13 To 35) The audit procedure "Examine paid notes for cancellation to make sure they are not still outstanding" Terms: Audit procedure performed when verifying completeness objective for notes payable Learning Objective 22-3 14 To visit:http://downloadslide.blogspot.com 2) Which of the following owners' equity transactions usually require specific authorization from a Issuance of common stock Payment of dividends C) Issuance of common stock Yes Payment of dividends D) Issuance of common stock Payment of dividends Answer: B 3) When a company maintains its own records of stock transactions and outstanding stock, internal Diff: Moderate 15 To 4) The amount of time spent verifying owners' equity is frequently minimal for closely held corporations Diff: Moderate 5) Which of the following types of owners' equity transactions would not require authorization by the 6) The record of the issuance and repurchase of capital stock for the life of the corporation is maintained 7) The record of the outstanding shares at any given time is maintained in the: B) stock certificate books. 16 To 8) When a dividend is declared by the board of directors, the source for determining who should receive D) corporate
directory. 9) The authorization of an issuance of capital stock normally includes all but which of the following? 10) Any company with stock listed on a securities exchange is required to engage a(n) ________. 11) 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: 17 To 12) Which of the following statements is true? C) There is a direct relationship between the interest and dividends accounts and debt and equity. 13) When a company maintains its own records of stock transactions and capital stock outstanding
its 14) What is the difference between an independent registrar and a stock transfer agent? 15) What are two important procedures that companies should implement to prevent misstatements in 18 To 16) Discuss the internal controls related to owners' equity that are of concern to the auditor. • Proper recordkeeping and segregation of duties. This should include well-defined policies for preparing 19 To 17) Match six of the terms (a-i) used in the capital acquisitions and repayment cycle with the descriptions b. Capital acquisition and repayment cycle ________ 1. An outside person engaged by a corporation to make sure that its stock is issued in Answer: 20 To 18) The Securities and Exchange Commission requires companies listed on exchanges to employ stock transfer agents. 19) Public companies whose stock is listed on a stock exchange must employ an independent registrar. 20) The shareholders' capital stock master file is used as the basis for the payment of dividends and also 21) Independent registrars commonly disburse cash dividends to shareholders. B) False 22) Few large companies employ stock transfer agents, but small companies commonly do so. 21 To http://downloadslide.blogspot.com 23) Any company that has more than 10 percent of its stock owned by one person is considered to be 24) A shareholders' capital stock master file is a record of the issuance and repurchase of capital stock 25) Capital stock represents a legal obligation to a shareholder and ensures a certain return to the AACSB: Reflective thinking skills Learning Objective 22-4 22 To 2) The audit of owners' equity of public and private companies is very different. Which of the following is 3) Which of the following audit objectives is least important in the audit of capital stock and paid-incapital in excess of par? 4) The primary concern in determining whether retained earnings is correctly disclosed on the balance Answer: D 23 To 5) What type of audit test will auditors use when testing to see if existing capital stock transactions are Yes Tests of transactions Tests of controls C) Tests of transactions Tests of controls D) Tests of transactions Tests of controls Answer: A 6) What type of audit test will auditors use when testing to see if the amounts of capital stock transactions Tests of transactions Tests of controls C) Tests of transactions Tests of controls D) Tests of transactions Tests of controls Answer: D 24 To ebooks,slides, 7) When a company has treasury stock certificates on hand, a year-end count of the certificates by the 8) When conducting the audit of stockholders' equity it is normal practice to verify all capital stock AACSB: Reflective thinking skills 9) State the four most important audit objectives for capital stock and describe how the auditor typically 25 What is capital acquisition and repayment cycle? Capital acquisition and repayment cycle is the transaction cycle involving the acquisition of capital resources in the form of interest-bearing debt and owners' equity, and the repayment of the capital Four unique characteristics of the capital acquisition and repayment cycle significantly influence the audit of ...
Which of the following is most reliable for verifying the correct balance of accounts payable?Which of the following is most reliable for verifying the correct balance of accounts payable? Vendors' statements and vendors' invoices are both relatively reliable evidence because they: originate from a third party.
Which of the following is an auditor most likely to confirm from the transfer agent and registrar?Which of the following is an auditor most likely to confirm from the transfer agent and registrar? Total shares of stock issued. The auditors' program for the examination of long term debt should include steps that require the: Examination of any bond trust indenture.
Which of the following may be considered to be a primary objective of the auditor in the examination?The objective of the auditor is to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement, through designing and implementing appropriate responses to those risks.
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Which of following statement regarding the capital acquisition and repayment cycle is most correct
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