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ACCT 460 Chapter 15
Auditing 460
12
Accounting
05/28/2010

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Term
c) Determine that the client has rights to receive proceeds relating to the redemption of debt
Definition
Which of the following is least likely to be an audit objective for debt?
a) Determine the existence of recorded debt
b) Establish the completeness of recorded debt
c) Determine that the client has rights to receive proceeds relating to the redemption of debt
d) Determine that the valuation of debt is in accordance with GAAP
Term
a) Interest payments
Definition
The auditors would be most likely to find unrecorded long-term liabilities by analyzing:
a) Interest payments
b) Discounts on long-term liabilities
c) Premiums on long-term liabilities
d) Recorded long-term liability accounts
Term
b) current liabilities
Definition
A likely reason that consideration of client compliance with debt provisions is important to an audit is that violation of such debt provisions may affect the total recorded:
a) Number of debt restrictions
b) current liabilities
c) long-term assets
d) capital stock
Term
b) shares issued and outstanding
Definition
A transfer agent and a registrar are most likely to provide the auditor with evidence on:
a) restrictions on the payment of accounts payable
b) shares issued and outstanding
c) preferred stock liquidation value
d) transfers occurring between management and related parties
Term
b) holders of common stock
Definition
The audit procedure of confirmation is least appropriate with respect to:
a) The trustee of an issue of bonds payable
b) holders of common stock
c) holders of notes receivable
d) holders of notes payable
Term
a) numbered stock certificates on hand
Definition
An auditor is most likely to trace treasury stock purchase transactions to the:
a) numbered stock certificates on hand
b) articles of incorporation
c) year's interest expense
d) minutes of the audit committee
Term
b) revenue
Definition
In the continuing audit of a manufacturing company of medium size, which of the following areas would you expect to require the least amount of audit time?
a) owners' equity
b) revenue
c) assets
d) liabilities
Term
c) confirmation with the bond trustee
Definition
The auditors can best verify a client's bond sinking fund transactions and year-end balance by:
a) recomputation of interest expense, interest payable, and amortization of bond discount or premium
b) confirmation with individual holders of retired bonds
c) confirmation with the bond trustee
d) examination and count of the bonds retired during the year
Term
b) examination of copies of debt agreements
Definition
The auditors' program for the examination of long-term debt should include steps that require the:
a) verification of the existence of the bondholders
b) examination of copies of debt agreements
c) inspection of the accounts payable subsidiary ledger
d) investigation of credits to the bond interest income account
Term
d) numbered stock certificates
Definition
All corporate capital stock transactions should ultimately be traced to the:
a) minutes of the board of directors
b) cash receipts journal
c) cash disbursements journal
d) numbered stock certificates
Term
c) determine that the presentation and disclosure of owners' equity is appropriate
Definition
Which of the following is most likely to be an audit objective in the audit of owners' equity?
a) establish that recorded owners' equity includes all long-term debt and equity balances
b) determine that common stock is valued at current market value
c) determine that the presentation and disclosure of owners' equity is appropriate
d) determine that the existence of recorded owner's equity is in conformity with equity accounting rule valuations
Term
a) segregation of personal net worth and business capital
Definition
In an audit of a sole proprietorship, a common difficulty is lack of:
a) segregation of personal net worth and business capital
b) availability of the owner
c) agreement as to the distribution between retained earnings and owners' capital
d) proper measures of dividends