Exam 13: Auditing Long-Term Liabilities and Stockholders Equity Transactions

For both debt accounts and stockholders' equity accounts,evidence would typically be obtained only through substantive procedures.

Which of the following is not an inherent risk typically associated with debt covenant compliance issues?

Stock issuances generally do not present valuation problems because most stock is issued in exchange for cash.

An audit of the other postemployment benefits does not require estimates with respect to which of the following?

Once the auditor has obtained an understanding of the inherent and fraud risks of material misstatement associated with debt and stockholders' equity transactions,the auditor needs to understand the controls that the client has designed and implemented to address those risks.

Which of the following would an auditor not typically perform as part of gaining an understanding of the client's controls related to debt?

Inherent risks related to debt primarily concern the authorization of debt,receipt of funds,recording debt transactions,and compliance with any debt covenants.

Which of the following would a bond indenture not provide information about?

If tests of controls result in identified control deficiencies,how will the auditor assess those deficiencies?

Which of the following would the auditor consider as part of the control environment related to debt?

Which of the following is the least important in helping the auditor develop an independent expectation of interest expense as a substantive analytical procedure?

In those audits where there is a heightened risk of fraud related to stockholders' equity accounts,which of the following will the auditor typically not perform?

Which of the following statements is true regarding the appropriate audit procedures to perform for debt and stockholder's equity accounts?

When obtaining evidence about internal control operating effectiveness,the auditor will select only entity-wide controls for testing.

Which of the following is not a typical test of controls when auditing debt and equity transactions?

Which of the following would not typically be included as part of the balance sheet disclosures related to stockholders' equity?

As a starting point for testing capital stock and equity transactions,the auditor should review a copy of the client's articles of incorporation.

For those clients with treasury stock,which of the following would the auditor be least likely to perform?

Which of the following is not an element of pensions and other postemployment benefits that is difficult to estimate?

You are engaged in the audit of Bordon Corporation,whose records have not previously been audited by your firm.The company has an independent transfer agent,as well as a registrar for its capital stock.The transfer agent maintains the record of stockholders,while the registrar checks that there is no overissue of stock.Both the transfer agent and registrar are required to validate stock certificates. One of the seniors on the audit proposes that confirmations be obtained from both the transfer agent and registrar regarding the outstanding stock balance at the balance sheet date.If the confirmations agree with the books,then he proposes that no additional work is to be performed on the capital stock account. REQUIRED: Do you agree or disagree that this will be sufficient? If yes,give the justification for your position.If no,state specifically all additional steps you would take and why you would take them.