Accounting chapter 10

reconciliation of cash. The typical business activity of the finance and investment cycle would not include
completeness Selecting a sample of paid notes and tracing interest to the general ledger account is a test of the PCAOB assertion for
goodwill is valued at market value The typical assertions related to investments and related accounts would not include the PCAOB assertion that
Custody The decision of a company to have a transfer agent handle exchanges of shares is related primarily to which of the functional responsibilities?
Completeness ABC Company has issued a bond that pays 5% interest semiannually to bond holders on record June 30 and December 30. Payments are made on July 15 and January 15. ABC Company has a December 31 fiscal year-end. The auditor vouches the January 15, 2010 payment to the liabilities recorded on the December 31, 2009 balance sheet. Which of the following ASB balance assertions is the auditor testing?
existence Auditors count investment securities held by the client primarily to test the ASB balance assertion of
Observing whether estimates are prepared by qualified personnel. Which of the following is not a substantive audit procedure for estimates of management?
Capital budget Which of the following would not be a place in which owners’ equity transactions would be documented?
an independent registrar. If it would be appropriate to confirm capital stock, the auditor would obtain the confirmation from
always look into the background of the client before accepting an engagement. In Case 10.4 (No Treasure in This Treasure Planet), Disney overvalued net assets by capitalizing unrecoverable production costs. The lesson for the auditors in this case was to
Completeness Which ASB balance assertion is of the most importance to auditors for long-term liabilities?
cutoff Are interest payments and accruals monitored for due dates and financial statement dates?” is an internal control questionnaire item that is related to the ASB transaction assertion of
Review by the independent auditor Which of the following would not be a typical feature of management’s control over the production of estimates?
All material long-term liabilities are recorded Which of the following management assertions for long-term liabilities is related to the ASB balance assertion of completeness?
market-based values The preferred method of determining fair value of transactions is
stock options Derivative instruments include
handles the exchange of shares, canceling the shares surrendered by sellers and issuing new certificates. A transfer agent
select a sample of paid notes and recalculate interest expense for the period under audit In the audit of notes payable, an auditor testing the ASB balance assertion of accuracy and valuation most likely would
study the entity’s cash flow forecasts To determine whether facts support management’s intent to hold securities to maturity, an auditor might
Independent personnel periodically compare the recorded balances in the investment subsidiary ledger with the contents of the safety deposit box Which of the following controls would be most effective in ensuring that the proper custody of assets in the investing cycle is maintained?
compare interest expense with the bond payable amount for reasonableness In auditing long-term bonds payable, an auditor most likely would
rights and obligations During an audit of an entity’s stockholders’ equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify the ASB presentation and disclosure assertion of
valuation In auditing intangible assets, an auditor most likely would review or recompute amortization and determine whether the amortization period is reasonable in support of the ASB balance assertion of
rights and obligations In confirming with an outside agent, such as a financial institution, that the agent is holding investment securities in the client’s name, an auditor most likely gathers evidence in support of ASB balance assertion of existence and
proper authorizations and competent personnel. The focus of controls in the finance and investment cycle is on
reconciliation of detailed listings with general ledger amounts. The focus of substantive tests in the finance and investment cycle is on
feature involvement of two or more persons handling all important responsibilities Compensating controls in the finance and investment cycle
External auditor involvement in developing assumptions. Which of the following is not a relevant aspect of internal controls over estimates?
require the borrower to maintain certain financial characteristics Loan covenants
must be disclosed in the financial statements Related party transactions
understating income Taking a “big bath” in the financial statements refers to

Leave a Reply

Your email address will not be published. Required fields are marked *