Which of the following would not be a typical feature of management's control over the production of
estimates?
Accumulation of relevant, sufficient, and reliable data
Preparation of estimates by qualified personnel
...
Which of the following would not be a typical feature of management's control over the production of
estimates?
Accumulation of relevant, sufficient, and reliable data
Preparation of estimates by qualified personnel
Review by the independent auditor
Consideration by management of whether particular accounting estimates are consistent with
the company's operational plans
The document that indicates what property plant and equipment the company wants to purchase in a
given year is the cash flow forecast.
True
False
When stock is used in exchange for tangible assets, the auditor should inspect the assets to ensure
the assets exist.
True
False
A transfer agent
keeps the stockholder list and, from time to time, determines the shareholders eligible to receive
dividends.
handles the exchange of shares, canceling the shares surrendered by sellers and issuing
new certificates.
records notes and bonds payable.
makes investment decisions for an entity.
Which of the following management assertions for long-term liabilities is related to the ASB balance
assertion of completeness?
All material long-term liabilities are recorded.
New long-term liabilities and debt extinguishments are properly authorized.
Terms, conditions, and restrictions relating to noncurrent debt are adequately disclosed.
Disclosures of maturities for the next five years are accurate and adequate.
Sales of capital stock and debt financing transactions usually are authorized by the chief financial
officer.
True
False
The focus of controls in the finance and investment cycle is on
proper authorizations and competent personnel.
computer controls over transactions.
physical security of assets.
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prenumbered documents.
If it would be appropriate to confirm capital stock, the auditor would obtain the confirmation from
management.
the board of directors.
stockholders.
an independent registrar.
An indenture is the written agreement between the bond issuer and the bondholder.
True
False
Taking a "big bath" in the financial statements refers to
overstating income.
overstating revenues.
understating income.
an economic downturn.
Selecting a sample of notes payable transactions and vouching payments to canceled checks is a
test of the ASB balance assertion of
accuracy.
completeness.
existence.
presentation.
Keeping track of securities owners for payment of interest or dividends is usually done by the
company's
treasurer.
broker.
transfer agent.
registrar.
When independent stock transfer agents are not employed and the corporation issues its own stock
and maintains stock records, canceled stock certificates should
be defaced to prevent reissuance and attached to their corresponding stubs.
not be defaced but be segregated from other stock certificates and retained in a canceled certificates
file.
be destroyed to prevent fraudulent reissuance.
be defaced and sent to the secretary of state.
In an audit test of recorded interest expense and accrued interest, the auditor was able to detect that
the recorded interest expense was higher than the calculations showed. This may indicate
a failure to accrue interest occurred.
interest payments are in default.
interest payments were charged to another account.
interest was paid on an unknown debt or unrecorded liability.
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A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the
auditors are unable to count securities at the balance-sheet date, they most likely will
request the bank to confirm to the auditors the contents of the safe deposit box at the balance-sheet
date.
examine supporting evidence for transactions occurring during the year.
count the securities at a subsequent date and confirm with the bank whether securities were added
or removed since the balance-sheet date.
request the client to have the bank seal the safe deposit box until the auditors can count the
securities at a subsequent date.
An audit plan to examine long-term debt most likely would include steps that require
comparing the carrying amount of held-to-maturity securities with their year-end market values.
correlating interest expense recorded for the period with outstanding debt.
verifying the existence of the holders of the debt by direct confirmation.
inspecting the accounts payable subsidiary ledger for unrecorded long-term debt.
The typical assertions related to investments and related accounts would not include the PCAOB
assertion that
capitalized intangible costs relate to intangibles acquired in exchange transactions.
amortization is properly calculated.
research and development costs are properly classified.
goodwill is valued at market value.
Which ASB balance assertion is of the most importance to auditors for long-term liabilities?
Existence
Completeness
Rights and obligations
Valuation
Auditors count investment securities held by the client primarily to test the ASB balance assertion of
existence.
rights and obligations.
completeness.
valuation.
When the client holds a large amount of negotiable securities, auditors need to plan to guard against
unauthorized negotiation of the securities before they are counted.
unrecorded sales of securities after they are counted.
substitution of securities already counted for other securit
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