Question 1

Substantive tests of long-term debt balances may be performed either before or after the balance sheet date.

Accepted Answer

A) True 
 B)False

Question 2

Property pledged as security for loans need not be disclosed.

Accepted Answer

A) True 
 B)False

Question 3

Listed below are five assertion categories coded by the letters A through E.
-Stockholders' equity balances represent owners' claims on the reporting entity's assets.

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 4

Each entry to retained earnings should be vouched to supporting documentation.

Accepted Answer

A) True 
 B)False

Question 5

The substantive test of vouching plant asset disposals to supporting documentation is categorized under:

Accepted Answer

A)  initial procedures. 
B)  analytical procedures. 
C)  tests of details of transactions. 
D)  tests of details of balances. 
E)  presentation and disclosure. 
A)  initial procedures. 
B)  analytical procedures. 
C)  tests of details of transactions. 
D)  tests of details of balances. 
E)  presentation and disclosure.

Question 6

The financing cycle interfaces with the:

Accepted Answer

A)  investing cycle. 
B)  expenditure cycle. 
C)  revenue cycle. 
D)  production cycle. 
E)  personnel services cycle. 
A)  investing cycle. 
B)  expenditure cycle. 
C)  revenue cycle. 
D)  production cycle. 
E)  personnel services cycle.

Question 7

Listed below are five assertion categories coded by the letters A through E.
-Plant assets and related expenses are properly identified and classified in the financial statements.

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 8

Investing activities include the purchase and sale of financial instruments intended for trading purposes.

Accepted Answer

A) True 
 B)False

Question 9

The substantive test of comparing financial statement presentation with GAAP is categorized under:

Accepted Answer

A)  initial procedures. 
B)  analytical procedures. 
C)  tests of details of transactions. 
D)  tests of details of balances. 
E)  presentation and disclosure. 
A)  initial procedures. 
B)  analytical procedures. 
C)  tests of details of transactions. 
D)  tests of details of balances. 
E)  presentation and disclosure.

Question 10

When plant assets are acquired under a capital lease, the cost of the property and the related liability should be recorded at the present value of the future minimum lease payments.

Accepted Answer

A) True 
 B)False

Question 11

The audit significance of the financial ratio, times interest earned, is:

Accepted Answer

A)  this financial ratio provides a reasonableness test of the entity's proportion of equity that may be compared with prior years' experience or industry data. 
B)  an unexpected increase or decrease in the depreciation expense as a percent of depreciable assets may indicate an error in calculating depreciation. 
C)  an unexpected increase in this financial ratio may indicate the failure to record or capitalize depreciable assets. 
D)  this financial ratio provides a test of the entity's ability to generate earnings to cover the cost of service debt. 
E)  this financial ratio provides a reasonableness test of shareholders' equity given the company's earnings and financing structure. 
A)  this financial ratio provides a reasonableness test of the entity's proportion of equity that may be compared with prior years' experience or industry data. 
B)  an unexpected increase or decrease in the depreciation expense as a percent of depreciable assets may indicate an error in calculating depreciation. 
C)  an unexpected increase in this financial ratio may indicate the failure to record or capitalize depreciable assets. 
D)  this financial ratio provides a test of the entity's ability to generate earnings to cover the cost of service debt. 
E)  this financial ratio provides a reasonableness test of shareholders' equity given the company's earnings and financing structure.

Question 12

Listed below are five assertion categories coded by the letters A through E.
-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.

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 13

Entries for dividend declarations and retained earnings appropriations are traced to the minutes book. In determining the propriety of the distribution, the auditor should:

Accepted Answer

A)  establish that preferential or other rights of stockholders and any restrictions on dividend distributions have been recognized. 
B)  establish the number of shares outstanding on the date of record and verify the accuracy of the total dividend declaration by recalculation. 
C)  ascertain the propriety of the entry to record the declaration. 
D)  review the minutes to provide evidence of stockholders' equity transactions authorized during the year. 
E)  trace dividend payments to canceled checks and other documentation. 
A)  establish that preferential or other rights of stockholders and any restrictions on dividend distributions have been recognized. 
B)  establish the number of shares outstanding on the date of record and verify the accuracy of the total dividend declaration by recalculation. 
C)  ascertain the propriety of the entry to record the declaration. 
D)  review the minutes to provide evidence of stockholders' equity transactions authorized during the year. 
E)  trace dividend payments to canceled checks and other documentation.

Question 14

Equity financing might be used either to support investing activities, or to support needed investments in working capital.

Accepted Answer

A) True 
 B)False

Question 15

Analytical procedures used to audit plant assets often include calculation of :

Accepted Answer

A)  return on common equity. 
B)  return on total assets. 
C)  interest bearing debt to total assets. 
D)  inventory turnover. 
E)  sustainable growth rate. 
A)  return on common equity. 
B)  return on total assets. 
C)  interest bearing debt to total assets. 
D)  inventory turnover. 
E)  sustainable growth rate.

Question 16

The specific account balance audit objective, plant asset balances include the effects of all applicable transactions for the period, 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 17

Entering into a capital lease is both a financing activity and an investing activity.

Accepted Answer

A) True 
 B)False

Substantive tests of long-term debt balances may be performed either before or after the balance sheet date.

Property pledged as security for loans need not be disclosed.

Listed below are five assertion categories coded by the letters A through E. -Stockholders' equity balances represent owners' claims on the reporting entity's assets.

Each entry to retained earnings should be vouched to supporting documentation.

The substantive test of vouching plant asset disposals to supporting documentation is categorized under:

The financing cycle interfaces with the:

Listed below are five assertion categories coded by the letters A through E. -Plant assets and related expenses are properly identified and classified in the financial statements.

Investing activities include the purchase and sale of financial instruments intended for trading purposes.

The substantive test of comparing financial statement presentation with GAAP is categorized under:

When plant assets are acquired under a capital lease, the cost of the property and the related liability should be recorded at the present value of the future minimum lease payments.

The audit significance of the financial ratio, times interest earned, is:

Listed below are five assertion categories coded by the letters A through E. -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.

Entries for dividend declarations and retained earnings appropriations are traced to the minutes book. In determining the propriety of the distribution, the auditor should:

Equity financing might be used either to support investing activities, or to support needed investments in working capital.

Analytical procedures used to audit plant assets often include calculation of :

The specific account balance audit objective, plant asset balances include the effects of all applicable transactions for the period, relates to the:

Entering into a capital lease is both a financing activity and an investing activity.

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

Substantive tests of long-term debt balances may be performed either before or after the balance sheet date.

Property pledged as security for loans need not be disclosed.

Listed below are five assertion categories coded by the letters A through E. -Stockholders' equity balances represent owners' claims on the reporting entity's assets.

Each entry to retained earnings should be vouched to supporting documentation.

The substantive test of vouching plant asset disposals to supporting documentation is categorized under:

The financing cycle interfaces with the:

Listed below are five assertion categories coded by the letters A through E. -Plant assets and related expenses are properly identified and classified in the financial statements.

Investing activities include the purchase and sale of financial instruments intended for trading purposes.

The substantive test of comparing financial statement presentation with GAAP is categorized under:

When plant assets are acquired under a capital lease, the cost of the property and the related liability should be recorded at the present value of the future minimum lease payments.

The audit significance of the financial ratio, times interest earned, is:

Listed below are five assertion categories coded by the letters A through E. -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.

Entries for dividend declarations and retained earnings appropriations are traced to the minutes book. In determining the propriety of the distribution, the auditor should:

Equity financing might be used either to support investing activities, or to support needed investments in working capital.

Analytical procedures used to audit plant assets often include calculation of :

The specific account balance audit objective, plant asset balances include the effects of all applicable transactions for the period, relates to the:

Entering into a capital lease is both a financing activity and an investing activity.

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