Exam 17: Auditing the Investing and

Different industries have different types of assets and use different types of financing. How are net fixed assets financed for a company in (1) the hotel industry, (2) the retail grocery industry, and (3) the computer manufacturing industry?

(Essay)

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(41)

Question 21

During inspection of the stock certificate book, the auditor determines that all unissued certificates are intact. This relates primarily to the:

(Multiple Choice)

4.8/5

(46)

Question 22

The classes of transactions associated with the audit of plant assets do not include:

(Multiple Choice)

4.8/5

(37)

Question 23

The auditor will normally find evidence concerning the proper authorization of transactions in the financing cycle by:

(Multiple Choice)

4.8/5

(38)

Question 24

Match the specific account balance audit objectives with the codes for the assertion categories.

Long-term debt and related income statement balances and stockholders’ equity balances are properly valued in accordance with GAAP.

Completeness

Recorded long-term debt balances represent debt that exists at the balance sheet date, and related income statement balances represent the effects of long-term debt transactions and events that occurred during the period.

Existence or Occurrence

All terms, covenants, commitments, and retirement provisions pertaining to long-term debt are adequately disclosed.

Rights and Obligations

Correct Answer:

Verified

Long-term debt and related income statement balances and stockholders’ equity balances are properly valued in accordance with GAAP.

Recorded long-term debt balances represent debt that exists at the balance sheet date, and related income statement balances represent the effects of long-term debt transactions and events that occurred during the period.

All terms, covenants, commitments, and retirement provisions pertaining to long-term debt are adequately disclosed.

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.

Stockholders’ equity balances represent owners’ claims on the reporting entity’s assets.

(Matching)

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(30)

Question 25

The specific financing cycle audit objective, stockholders' equity balances represent the owners' interests that exist at the balance sheet date, relates to the:

(Multiple Choice)

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Question 26

The ownership of vehicles may be established by examining certificates of title, registration certificates, and invoices.

(True/False)

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Question 27

The use of variable interest entities increase inherent risks:

(Multiple Choice)

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(32)

Question 28

The disclosure requirements for long-term debt and stockholders' equity are usually significant.

(True/False)

4.9/5

(33)

Question 29

The substantive test of calculating fixed asset turnover is categorized under:

(Multiple Choice)

4.9/5

(30)

Question 30

Documentation of the cost of treasury stock should be available to the auditor in the form of authorizations in the minutes, disbursement vouchers, and canceled checks.

(True/False)

4.9/5

(38)

Question 31

Evidence obtained while auditing disposals of plant assets may assist in the audit of repairs and maintenance expense.

(True/False)

4.9/5

(43)

Question 32

For bonds, the auditor should obtain evidence on both the face value and net proceeds of the obligations as of the balance sheet date.

(True/False)

4.8/5

(31)

Question 33

Listed below are five assertion categories coded by the letters A through E. -Plant assets are stated at cost less accumulated depreciation.

(Multiple Choice)

4.8/5

(34)

Question 34

If capital stock is held in the treasury, the auditor should count the certificates at the same time other securities are counted.

(True/False)

4.9/5

(30)

Question 35

The audit significance of the financial ratio, fixed asset turnover, is:

(Multiple Choice)

4.8/5

(42)

Question 36

Events may occur between acquiring and retiring an asset that affect the completeness assertion and require an immediate writedown of the asset.

(True/False)

4.7/5

(34)

Question 37

Match the specific account balance audit objectives with the codes for the assertion categories .

The entity owns or has rights to all recorded plant assets at the balance sheet date.

Completeness

Plant asset balances include the effects of all applicable transactions for the period.

Existence or Occurrence

Plant assets are stated at cost less accumulated depreciation.

Rights and Obligations

Correct Answer:

Verified

The entity owns or has rights to all recorded plant assets at the balance sheet date.

Plant asset balances include the effects of all applicable transactions for the period.

Plant assets are stated at cost less accumulated depreciation.

Plant assets and related expenses are properly identified and classified in the financial statements.

Recorded plant assets represent productive assets that are in use at the balance sheet date.

(Matching)

4.8/5

(26)

Question 38

Listed below are five assertion categories coded by the letters A through E. -Recorded plant assets represent productive assets that are in use at the balance sheet date.

(Multiple Choice)

4.9/5

(43)

Question 39

The substantive test of determining the significance of plant assets, and changes in plant assets, to the entity is categorized under:

(Multiple Choice)

4.8/5

(30)

Question 40

Different industries have different types of assets and use different types of financing. How are net fixed assets financed for a company in (1) the hotel industry, (2) the retail grocery industry, and (3) the computer manufacturing industry?

During inspection of the stock certificate book, the auditor determines that all unissued certificates are intact. This relates primarily to the:

The classes of transactions associated with the audit of plant assets do not include:

The auditor will normally find evidence concerning the proper authorization of transactions in the financing cycle by:

The specific financing cycle audit objective, stockholders' equity balances represent the owners' interests that exist at the balance sheet date, relates to the:

The ownership of vehicles may be established by examining certificates of title, registration certificates, and invoices.

The use of variable interest entities increase inherent risks:

The disclosure requirements for long-term debt and stockholders' equity are usually significant.

The substantive test of calculating fixed asset turnover is categorized under:

Documentation of the cost of treasury stock should be available to the auditor in the form of authorizations in the minutes, disbursement vouchers, and canceled checks.

Evidence obtained while auditing disposals of plant assets may assist in the audit of repairs and maintenance expense.

For bonds, the auditor should obtain evidence on both the face value and net proceeds of the obligations as of the balance sheet date.

Listed below are five assertion categories coded by the letters A through E. -Plant assets are stated at cost less accumulated depreciation.

If capital stock is held in the treasury, the auditor should count the certificates at the same time other securities are counted.

The audit significance of the financial ratio, fixed asset turnover, is:

Events may occur between acquiring and retiring an asset that affect the completeness assertion and require an immediate writedown of the asset.

Listed below are five assertion categories coded by the letters A through E. -Recorded plant assets represent productive assets that are in use at the balance sheet date.

The substantive test of determining the significance of plant assets, and changes in plant assets, to the entity is categorized under:

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

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