Question 1

When a company enters into a capital lease, the values of the additional asset and debt are independently determined.

Accepted Answer

A) True 
 B)False  False

Question 2

The specific account balance audit objective, plant assets and related expenses are properly identified and classified in the financial statements, relates to the:

Accepted Answer

A)  rights and obligations assertion. 
B)  completeness assertion. 
C)  existence or occurrence assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion. 
A)  rights and obligations assertion. 
B)  completeness assertion. 
C)  existence or occurrence assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion. E

Question 3

Investing activities include the sale of land, buildings, equipment and other assets not generally held for resale.

Accepted Answer

A) True 
 B)False  True

Question 4

Dividends require management authorization and are authorized in the bylaws.

Accepted Answer

A) True 
 B)False

Question 5

The specific account balance audit objective, the entity owns or has rights to all recorded plant assets at the balance sheet date, relates to the:

Accepted Answer

A)  rights and obligations assertion. 
B)  completeness assertion. 
C)  existence or occurrence assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion. 
A)  rights and obligations assertion. 
B)  completeness assertion. 
C)  existence or occurrence assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion.

Question 6

You have been assigned to the substantive testing of the plant assets of B Company.
REQUIRED: Describe the basic procedural steps that would be necessary in performing the following types of tests:
1.Obtain an understanding of the business and industry.
2.Inspect plant assets.

Accepted Answer

1. Obtain an understanding of the busine

Question 7

The following statement about inherent risk for long-lived assets is not true:

Accepted Answer

A)  The rights and obligations assertion is significant because assets are usually pledged as collateral for the underlying debt. 
B)  Impairment of long-lived assets poses an inherent risk for the valuation assertion. 
C)  The completeness assertion rarely presents a high inherent risk. 
D)  Misstatements of disclosures represent only a moderate inherent risk. 
E)  Inherent risk for the existence assertion is often low. 
A)  The rights and obligations assertion is significant because assets are usually pledged as collateral for the underlying debt. 
B)  Impairment of long-lived assets poses an inherent risk for the valuation assertion. 
C)  The completeness assertion rarely presents a high inherent risk. 
D)  Misstatements of disclosures represent only a moderate inherent risk. 
E)  Inherent risk for the existence assertion is often low.

Question 8

The ratio times interest earned is calculated as:

Accepted Answer

A)  (interest expense + capitalized interest) ÷ income before interest and income taxes. 
B)  net income ÷ (interest expense + capitalized interest). 
C)  income before interest and income taxes ÷ (interest expense + capitalized interest). 
D)  (interest expense + capitalized interest) ÷ net income. 
E)  income before interest and income taxes ÷ (interest income + capitalized interest). 
A)  (interest expense + capitalized interest) ÷ income before interest and income taxes. 
B)  net income ÷ (interest expense + capitalized interest). 
C)  income before interest and income taxes ÷ (interest expense + capitalized interest). 
D)  (interest expense + capitalized interest) ÷ net income. 
E)  income before interest and income taxes ÷ (interest income + capitalized interest).

Question 9

The specific financing cycle audit objective, stockholders' equity balances include the effects of all transactions pertaining to paid-in capital and retained earnings through the balance sheet date, relates to the:

Accepted Answer

A)  rights and obligations assertion. 
B)  completeness assertion. 
C)  existence or occurrence assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion. 
A)  rights and obligations assertion. 
B)  completeness assertion. 
C)  existence or occurrence assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion.

Question 10

The specific financing cycle audit objective, long-term debt and related income statement balances and stockholders' equity balances are properly valued in accordance with GAAP, relates to the:

Accepted Answer

A)  rights and obligations assertion. 
B)  completeness assertion. 
C)  existence or occurrence assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion. 
A)  rights and obligations assertion. 
B)  completeness assertion. 
C)  existence or occurrence assertion. 
D)  valuation or allocation assertion. 
E)  presentation or disclosure assertion.

Question 11

The ratio total asset turnover is calculated as: net sales divided by average fixed assets.

Accepted Answer

A) True 
 B)False

Question 12

Confirming long-term debt relates to four assertions: existence or occurrence, completeness, rights and obligations, and valuation or allocation.

Accepted Answer

A) True 
 B)False

Question 13

Dividend payout rate is calculated as:

Accepted Answer

A)  total dividends ÷ operating income. 
B)  cash dividends ÷ operating income. 
C)  total dividends ÷ by net income. 
D)  operating income ÷ total dividends. 
E)  cash dividends ÷ net income. 
A)  total dividends ÷ operating income. 
B)  cash dividends ÷ operating income. 
C)  total dividends ÷ by net income. 
D)  operating income ÷ total dividends. 
E)  cash dividends ÷ net income.

Question 14

The inspection of plant assets enables the auditor to obtain direct personal knowledge of their existence.

Accepted Answer

A) True 
 B)False

Question 15

Which one of the following is an?

Accepted Answer

A)  acquiring debt 
B)  capital leases 
C)  selling land 
D)  issuing bonds 
E)  issuing preferred stock 
A)  acquiring debt 
B)  capital leases 
C)  selling land 
D)  issuing bonds 
E)  issuing preferred stock

Question 16

Listed below are five assertion categories coded by the letters A through E.
-Long-term debt balances represent all payables to long-term creditors at the balance sheet date, and related income statement balances represent the effects of all long-term debt transactions and events that occurred during the period.

Accepted Answer

A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure 
A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure

Question 17

Listed below are five assertion categories coded by the letters A through E.
-Long-term debt and related income statement balances and stockholders' equity balances are properly valued in accordance with GAAP.

Accepted Answer

A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure 
A) Completeness 
B) Existence or Occurrence 
C) Rights and Obligations 
D) Valuation or Allocation 
E) Presentation and Disclosure

Question 18

The dividend payout rate is calculated as: cash dividends divided by stockholders' equity.

Accepted Answer

A) True 
 B)False

Question 19

The client is expected to furnish support for any prior-period adjustments to retained earnings.

Accepted Answer

A) True 
 B)False

Question 20

The following procedures may be useful to the auditor in determining whether all retirements have been recorded except:

Accepted Answer

A)  analyze the miscellaneous expense account for proceeds from sales of plant assets. 
B)  investigate the disposition of facilities associated with discontinued product lines and operations. 
C)  trace retirement work orders and authorizations for retirements to the accounting records. 
D)  review insurance policies for termination or reductions of coverage. 
E)  make inquiry of management as to retirements. 
A)  analyze the miscellaneous expense account for proceeds from sales of plant assets. 
B)  investigate the disposition of facilities associated with discontinued product lines and operations. 
C)  trace retirement work orders and authorizations for retirements to the accounting records. 
D)  review insurance policies for termination or reductions of coverage. 
E)  make inquiry of management as to retirements.

When a company enters into a capital lease, the values of the additional asset and debt are independently determined.

The specific account balance audit objective, plant assets and related expenses are properly identified and classified in the financial statements, relates to the:

Investing activities include the sale of land, buildings, equipment and other assets not generally held for resale.

Dividends require management authorization and are authorized in the bylaws.

The specific account balance audit objective, the entity owns or has rights to all recorded plant assets at the balance sheet date, relates to the:

You have been assigned to the substantive testing of the plant assets of B Company. REQUIRED: Describe the basic procedural steps that would be necessary in performing the following types of tests: 1.Obtain an understanding of the business and industry. 2.Inspect plant assets.

The following statement about inherent risk for long-lived assets is not true:

The ratio times interest earned is calculated as:

The specific financing cycle audit objective, stockholders' equity balances include the effects of all transactions pertaining to paid-in capital and retained earnings through the balance sheet date, relates to the:

The specific financing cycle audit objective, long-term debt and related income statement balances and stockholders' equity balances are properly valued in accordance with GAAP, relates to the:

The ratio total asset turnover is calculated as: net sales divided by average fixed assets.

Confirming long-term debt relates to four assertions: existence or occurrence, completeness, rights and obligations, and valuation or allocation.

Dividend payout rate is calculated as:

The inspection of plant assets enables the auditor to obtain direct personal knowledge of their existence.

Which one of the following is an?

Listed below are five assertion categories coded by the letters A through E. -Long-term debt and related income statement balances and stockholders' equity balances are properly valued in accordance with GAAP.

The dividend payout rate is calculated as: cash dividends divided by stockholders' equity.

The client is expected to furnish support for any prior-period adjustments to retained earnings.

The following procedures may be useful to the auditor in determining whether all retirements have been recorded except:

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters

Exam 17: Auditing the Investing and

When a company enters into a capital lease, the values of the additional asset and debt are independently determined.

The specific account balance audit objective, plant assets and related expenses are properly identified and classified in the financial statements, relates to the:

Investing activities include the sale of land, buildings, equipment and other assets not generally held for resale.

Dividends require management authorization and are authorized in the bylaws.

The specific account balance audit objective, the entity owns or has rights to all recorded plant assets at the balance sheet date, relates to the:

You have been assigned to the substantive testing of the plant assets of B Company. REQUIRED: Describe the basic procedural steps that would be necessary in performing the following types of tests: 1.Obtain an understanding of the business and industry. 2.Inspect plant assets.

The following statement about inherent risk for long-lived assets is not true:

The ratio times interest earned is calculated as:

The specific financing cycle audit objective, stockholders' equity balances include the effects of all transactions pertaining to paid-in capital and retained earnings through the balance sheet date, relates to the:

The specific financing cycle audit objective, long-term debt and related income statement balances and stockholders' equity balances are properly valued in accordance with GAAP, relates to the:

The ratio total asset turnover is calculated as: net sales divided by average fixed assets.

Confirming long-term debt relates to four assertions: existence or occurrence, completeness, rights and obligations, and valuation or allocation.

Dividend payout rate is calculated as:

The inspection of plant assets enables the auditor to obtain direct personal knowledge of their existence.

Which one of the following is an?

Listed below are five assertion categories coded by the letters A through E. -Long-term debt and related income statement balances and stockholders' equity balances are properly valued in accordance with GAAP.

The dividend payout rate is calculated as: cash dividends divided by stockholders' equity.

The client is expected to furnish support for any prior-period adjustments to retained earnings.

The following procedures may be useful to the auditor in determining whether all retirements have been recorded except:

Auditing and the Public Accounting

Financial Statement Audits and

Professional Ethics

Auditors Legal Liability

Overview of the Audit Process

Audit Evidence, Audit Objectives,

Accepting the Engagement and

Materiality Decisions and Performing Analytical Procedures

Audit Risk, Including the Risk of Fraud

Understanding Internal Controls

Audit Procedures in Response to Assessed Risks: Tests of Controls

Audit Procedures in Response to Assessed Risks: Substantive Tests

Audit Sampling in Substantive Tests

Auditing the Revenue Cycle

Auditing the Expenditure Cycle

Auditing the Production and

Auditing Investments and

Completing the Audit and Postaudit

Attest and Assurance Services, and Related Reports

Internal, Operational, and

Filters