Audit ch10 Multiple Choice

A related party is a person or entity that

Can exert significant influence over or be influenced by the company.

An audit team's purpose in 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

Classification.

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

Compare interest expense with the bond payable amount for reasonableness.

Which of the following audit procedures would not likely be performed for audits of shareholders' equity?

Compare valuation of stock to published market prices.

ones 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?

Comparing recorded dividends with a standard financial reporting service's record of dividends.

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

Completeness of recorded investment income. EXHIBIT 10.8

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

Detect unrecorded liabilities.

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

Gain an understanding of internal controls and perform extensive substantive procedures.

All corporate capital stock transactions should ultimately be traced to the

Minutes of the meetings of the board of directors.

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

The loss in value be recognized in the financial statements.

Loan covenants are used for which of the following reasons?

To protect the lender from the borrower's substantially weakening financial position.

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

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

Which of the following assertions is most likely to have the highest risk of material misstatement for the goodwill account?

Valuation