Question 1

Goodwill within operating segments can be offset (netted).

Accepted Answer

A) True 
 B)False

Question 2

Impairment tests for goodwill should be performed at least every five years.

Accepted Answer

A) True 
 B)False

Question 3

When auditing an acquisition the auditor is faced with the problem of determining fair market value of the net assets acquired.

Accepted Answer

A) True 
 B)False

Question 4

What is the primary purpose for the SEC's requirement to disclose all transactions of senior management?

Accepted Answer

A) To make the public aware that members of management are typically greedy. 
B) To allow employees the opportunity to see the salaries commanded by management so that they can negotiate proportional increases. 
C) To hold management accountable for any unacceptable personal use of corporate assets. 
D) To give shareholders the indication that management is earning compensation through every possible avenue,as deserved. 
A) To make the public aware that members of management are typically greedy. 
B) To allow employees the opportunity to see the salaries commanded by management so that they can negotiate proportional increases. 
C) To hold management accountable for any unacceptable personal use of corporate assets. 
D) To give shareholders the indication that management is earning compensation through every possible avenue,as deserved.

Question 5

If a specialist is used by client management to value the assets of the target company,the auditor will most likely evaluate all of the following characteristics of the expert,except for which of the following?

Accepted Answer

A) fees and billings. 
B) credentials. 
C) methodologies. 
D) independence. 
A) fees and billings. 
B) credentials. 
C) methodologies. 
D) independence.

Question 6

Purchases of companies or divisions must be accomplished through payment of cash to make the cost of the acquisition straightforward.

Accepted Answer

A) True 
 B)False

Question 7

Accounting principles require goodwill arising from acquisitions to be amortized over the lesser of the estimated undiscounted cash flows at the operating unit level or 20 years.

Accepted Answer

A) True 
 B)False

Question 8

Auditing the warranty liability most likely includes the evaluation of which of the following?

Accepted Answer

A) Changes in the cost of repairing certain products. 
B) Production line employee turnover. 
C) Reserve for bad debt as a percent of sales. 
D) Supplies used in the production process. 
A) Changes in the cost of repairing certain products. 
B) Production line employee turnover. 
C) Reserve for bad debt as a percent of sales. 
D) Supplies used in the production process.

Question 9

The auditor may rely on management inquiry for all disclosures relating to bond indentures and the auditor need not read the entire indenture.

Accepted Answer

A) True 
 B)False

Question 10

The intangible assets of a newly acquired business must be identified and valued for proper recording in the combination.

Accepted Answer

A) True 
 B)False

Question 11

All of the following represent a related entity to an organization except

Accepted Answer

A) the president's son. 
B) an affiliate with common ownership. 
C) customers. 
D) primary owners. 
A) the president's son. 
B) an affiliate with common ownership. 
C) customers. 
D) primary owners.

Question 12

Which of the following represents the ultimate action required for treatment of a variable interest entity?

Accepted Answer

A) Consolidation 
B) Equity method 
C) Pooling method 
D) Elimination 
A) Consolidation 
B) Equity method 
C) Pooling method 
D) Elimination

Question 13

In testing goodwill for impairment,the audit team will evaluate management's

Accepted Answer

A) estimated allowance for goodwill losses as a percent of sales. 
B) ability to utilize the purchase method of accounting. 
C) assessment of the initial purchase price of the acquired company in relation to its assets. 
D) methodologies for assessing impairment. 
A) estimated allowance for goodwill losses as a percent of sales. 
B) ability to utilize the purchase method of accounting. 
C) assessment of the initial purchase price of the acquired company in relation to its assets. 
D) methodologies for assessing impairment.

Question 14

An experienced auditor will review the bond indenture while testing long-term obligations for which purpose?

Accepted Answer

A) To determine the fair market value of the bond and compare it to the recorded amount less a valuation allowance. 
B) To ensure that a provision has not been violated that will cause the debt to become current. 
C) To write disclosures for the client relating to bond terms such as interest and payments. 
D) To create a confirmation that will be sent to the bond trustee for proper verification of bond value. 
A) To determine the fair market value of the bond and compare it to the recorded amount less a valuation allowance. 
B) To ensure that a provision has not been violated that will cause the debt to become current. 
C) To write disclosures for the client relating to bond terms such as interest and payments. 
D) To create a confirmation that will be sent to the bond trustee for proper verification of bond value.

Question 15

Auditors should continually update themselves on generally accepted accounting principles relative to the accounting for restructurings as they continue to evolve.

Accepted Answer

A) True 
 B)False

Question 16

Restructuring charges and expenses may be estimated and a liability recorded as a result of acquisition activities.

Accepted Answer

A) True 
 B)False

Question 17

Zion Wilderness,Inc.is a public company that does not maintain its own stock books.How will the auditor most likely establish the number of shares outstanding for testing purposes?

Accepted Answer

A) Inquiry of management. 
B) Discussions with the stock trustee. 
C) Confirmation with the transfer agent. 
D) Examination of proceeds from current stock issuance. 
A) Inquiry of management. 
B) Discussions with the stock trustee. 
C) Confirmation with the transfer agent. 
D) Examination of proceeds from current stock issuance.

Question 18

Goodwill
Discuss what a 'reporting unit' is in an acquisition and how it is related to goodwill and goodwill impairment.

Accepted Answer

A reporting unit in an acquisition is an

Question 19

Goodwill must be specifically identified with an operating unit or reporting unit for impairment consideration.

Accepted Answer

A) True 
 B)False

Question 20

Auditors must control the client's information system in order to adequately identify related party entity transactions.

Accepted Answer

A) True 
 B)False

Goodwill within operating segments can be offset (netted).

Impairment tests for goodwill should be performed at least every five years.

When auditing an acquisition the auditor is faced with the problem of determining fair market value of the net assets acquired.

What is the primary purpose for the SEC's requirement to disclose all transactions of senior management?

If a specialist is used by client management to value the assets of the target company,the auditor will most likely evaluate all of the following characteristics of the expert,except for which of the following?

Purchases of companies or divisions must be accomplished through payment of cash to make the cost of the acquisition straightforward.

Accounting principles require goodwill arising from acquisitions to be amortized over the lesser of the estimated undiscounted cash flows at the operating unit level or 20 years.

Auditing the warranty liability most likely includes the evaluation of which of the following?

The auditor may rely on management inquiry for all disclosures relating to bond indentures and the auditor need not read the entire indenture.

The intangible assets of a newly acquired business must be identified and valued for proper recording in the combination.

All of the following represent a related entity to an organization except

Which of the following represents the ultimate action required for treatment of a variable interest entity?

In testing goodwill for impairment,the audit team will evaluate management's

An experienced auditor will review the bond indenture while testing long-term obligations for which purpose?

Auditors should continually update themselves on generally accepted accounting principles relative to the accounting for restructurings as they continue to evolve.

Restructuring charges and expenses may be estimated and a liability recorded as a result of acquisition activities.

Zion Wilderness,Inc.is a public company that does not maintain its own stock books.How will the auditor most likely establish the number of shares outstanding for testing purposes?

Goodwill Discuss what a 'reporting unit' is in an acquisition and how it is related to goodwill and goodwill impairment.

Goodwill must be specifically identified with an operating unit or reporting unit for impairment consideration.

Auditors must control the client's information system in order to adequately identify related party entity transactions.

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters

Exam 14: Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Goodwill within operating segments can be offset (netted).

Impairment tests for goodwill should be performed at least every five years.

When auditing an acquisition the auditor is faced with the problem of determining fair market value of the net assets acquired.

What is the primary purpose for the SEC's requirement to disclose all transactions of senior management?

If a specialist is used by client management to value the assets of the target company,the auditor will most likely evaluate all of the following characteristics of the expert,except for which of the following?

Purchases of companies or divisions must be accomplished through payment of cash to make the cost of the acquisition straightforward.

Accounting principles require goodwill arising from acquisitions to be amortized over the lesser of the estimated undiscounted cash flows at the operating unit level or 20 years.

Auditing the warranty liability most likely includes the evaluation of which of the following?

The auditor may rely on management inquiry for all disclosures relating to bond indentures and the auditor need not read the entire indenture.

The intangible assets of a newly acquired business must be identified and valued for proper recording in the combination.

All of the following represent a related entity to an organization except

Which of the following represents the ultimate action required for treatment of a variable interest entity?

In testing goodwill for impairment,the audit team will evaluate management's

An experienced auditor will review the bond indenture while testing long-term obligations for which purpose?

Auditors should continually update themselves on generally accepted accounting principles relative to the accounting for restructurings as they continue to evolve.

Restructuring charges and expenses may be estimated and a liability recorded as a result of acquisition activities.

Zion Wilderness,Inc.is a public company that does not maintain its own stock books.How will the auditor most likely establish the number of shares outstanding for testing purposes?

Goodwill Discuss what a 'reporting unit' is in an acquisition and how it is related to goodwill and goodwill impairment.

Goodwill must be specifically identified with an operating unit or reporting unit for impairment consideration.

Auditors must control the client's information system in order to adequately identify related party entity transactions.

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Long-Lived Assets and Related Expense Accounts

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters