Auditing Ch 15

A registrar/transfer agent system relating to capital stock is most likely used by:

A large, publicly traded company.

A large corporation entered into a very significant long-term debt agreement during the current year. Which of the following would the auditors most likely be concerned with:

Approval by the corporation's Board of Directors.

An audit plan for the examination of the retained earnings account should include a step that requires verification of the:

Authorization for both cash and stock dividends.

A primary responsibility of a registrar of capital stock is to:

Avoid any overissuance of stock.

When auditing treasury stock, one will normally expect to see an entry in which journal?

Cash disbursements.

The auditor can best verify a client's bond sinking fund transactions and year-end balance by:

Confirmation with the bond trustee.

For audit purposes, a corporation's articles of incorporation are normally:

Copied and placed in the permanent file.

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

Detect unrecorded liabilities.

Which of the following is the most important consideration of an auditor when examining the stockholders' equity section of a client's balance sheet?

Entries in the capital stock account can be traced to a resolution in the minutes of the board of directors' meetings.

Which of the following is not a primary objective in the audit of interest-bearing debt?

Establish the legality of outstanding debt.

In auditing long-term debt, an auditor would be most likely to:

Evaluate whether debt provisions have been met.

Which of the following procedures is least likely in the audit of capital stock?

Examine all outstanding stock certificates for completeness.

The auditors' program for the examination of long-term debt should include steps that require the:

Identification of notes payable to related parties.

When the auditors obtain an understanding of internal control for the financing cycle, documentation will frequently include a written description as well as a(n):

Internal control questionnaire.

An auditor obtains evidence of stockholders' equity transactions for a publicly traded company by reviewing the entity's:

Minutes of board of directors' meetings.

In which of the following accounts would one expect a related party transaction to be easiest to detect?

Notes payable.

For a large publicly traded client, the auditors' examination of capital stock accounts will not normally include:

Reconciliation of a stock certificate book with the general ledger.

During its fiscal year, a company issued, at a discount, a substantial amount of first-mortgage bonds. When performing audit work in connection with the bond issue, the independent auditor should:

Review the minutes for authorization.

The auditor would be least likely to be concerned about internal control as it relates to:

Shareholder meetings.

For a corporation that does not utilize the services of an independent registrar and stock transfer agent, which of the following represents a weakness in internal control over stock issuance?

Stock certificates are signed immediately upon receipt from the printer.

Which of the following statements is correct relating to common stock certificates of a publicly traded company that uses the services of a transfer agent?

Stock certificates often are not issued in today's electronic environment.

Changes in capital stock accounts should normally be approved by:

The board of directors.

Bond transactions are normally confirmed with:

The bond trustee.

Internal control over bonds payable is best when:

The company utilizes the services of a bond trustee.

In the audit of the allocation of income for a partnership, the auditors would be most interested in reviewing:

The partnership agreement.

Which of the following is an auditor most likely to confirm from the transfer agent and registrar?

Total shares of stock issued.

In performing substantive tests of stock options granted to senior management, an auditor most likely would:

Trace the authorization for the options granted to the board of directors' approval.

Which of the following most likely would approve the issuance of notes payable?

Treasurer

During an audit of a publicly-held company, the auditors should obtain written confirmation regarding debenture transactions from the:

Trustee.

The auditor's plan to examine interest-bearing debt most likely will include steps that require:

Vouching borrowing and repayment transactions.

A review of the board of directors' minutes is least likely to result in the discovery of:

Write-off of a large accounts payable.