Auditing Chapter 10

there has been unauthorized buying and selling of investment securities

ABC company has 100 shares of IBM stock that it holds as an investment. the stock was purchased three years ago and has been in the clients safe deposit box along with other investment securities. during an inspection of securities held by the client, the auditor noted the 100 shares of IBM stock has a different CUSIP number than the number listed when purchased and the number verified during the previous audit. which of the following would be the auditor's main concern about this discovery?

request the client to have the bank seal the safe deposit box until the auditors can count the securities at a subsequent date

a client has a large and active investment portfolio that is kept in a bank safe deposit box. if the auditors are unable to count securities at the balance sheet date, they most likely will

can exert significant influence over or be influenced by the company

a related party is a person or entity that

minutes of the meetings of the board of directors

all corporate capital stock transactions should ultimately be traced to the

authorization for both cash and stock dividends declared and paid

an audit plan for the examination of the retained earnings account should included a step that required verification of the (choose two steps)

correlating interest expense recorded for the period with outstanding debt

an audit plan to examine long term debt most likely would include steps that require

completeness of recorded investment income

an audit team testing long term investments would ordinarily use analytical procedures to ascertain the reasonableness of the

recomputing the interest earned on the basis of face amount, interest rate, and period held

an audit team would most likely verify the interest earned on bond investments by

classification

an audit teams purpose I reviewing the documentation concerning the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence concerning management's assertions about

the loss in value be recognized in the financial statements

if the auditors discover that the carrying amount of a client's investments is overstated because of a loss in value that is other than a temporary decline in market value, they should insist that

compare interest expense with the bond payable amount for reasonableness

in auditing for unrecorded long term bonds payable, an audit team most likely will

ascertain that the client has obtained the opinion of counsel on the legality of the issue

in connection with the audit of an issue of long term bonds payable, the audit team should

comparing recorded dividends with a standard financial reporting services record of dividends

jones was engaged to examine the financial statements of gamma corporation for the year ended june 30. having completed an examination of the investment securities, which of the following is the best method of verifying the accuracy of recorded dividend income?

to protect the lender from the borrowers substantially weakening of the latters financial position

loan covenants are used for which of the following reasons

acknowledge the receipt of securities returned

the auditors should insist that a representative of the client be present during the inspection and count of securities to

detect unrecorded liabilities

the primary reason for preparing a reconciliation between interest bearing obligations outstanding during the year and interest expense in the financial statements is to

the number of shares issued and outstanding

when a client company does not maintain its own capital stock records, the auditors should obtain written confirmation from the transfer agent and registrar concerning

trust company has no direct contact with the entity employees responsible for maintaining investment accounting records

when an entity used a trust company as custodian of its marketable securities, the possibility of concealing fraud most likely would be reduced if the

be defaced to prevent reissuance and attached to their corresponding stubs

when independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records, cancelled stock certificates should

substitution of securities already counted for other securities that should be on hand but are not

when the client holds a large amount of negotiable securities, auditors need to plan to guard against

gain an understanding of internal controls and performs extensive substantive procedures

which of the following approaches is most suitable for auditing the finance and investment cycle?

confirm investments with registrar

which of the following audit procedures would not likely be performed for audits of investments

compare valuation of stock to published market prices

which of the following audit procedures would not likely be performed for audits of shareholders equity

entries in the capital stock account can be traced to resolutions in the minutes of meetings of the board of directors

which of the following is the most important audit consideration when examining the stockholders' equity section of a clients balance sheet?

are direct borrowing on notes payable authorized by the board of directors

which of the following questions would auditors most likely include on an internal control questionnaire for notes payable?