Auditing Test #2 Ch. 15

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

A large, publicly trades company

An audit program 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 over issuance of stock

When no independent stock transfer agent is employed and the corporation issues its own stocks and maintains stock records, canceled stock certificates should

Be defaced to prevent reissuance and attached to their corresponding stubs

Changes in capital stock accounts should normally be approved by:

Board of Directors

Bond transactions are normally confirmed with

Bond Trustee

Company A does not employ an independent stock transfer agent, but rather issues its own stock and maintains its stock records. When outstanding shares are transferred from one holder to another the certificate of the selling shareholder should be

Canceled (generally by perforation) and attached to the certificate book

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

Compare interest expense with the long-term debt amount for reasonableness

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

Auditors often request that the audit client send a letter of inquiry to those attorneys who have been consulted with respect to litigation, claims, or assessments. The primary reason for this request is to provide the auditor with

Corroborative audit evidence

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: A. Evaluate internal control over securities

Detect unrecorded liabilities

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

Establish the legality of outstanding debt

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

Examination of any bond trust indenture

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

Examine all outstanding stock certificates for completeness

The audit approach for acquired treasury stock will normally include

Inspection of certificates

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

An auditor should trace corporate stock issuances and treasury stock transactions to the

Minutes of the board of directors

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

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

Internal control over bonds payable is best when

The company utilizes the services of a bond trustee

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

Total shares of stock issued

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 program to examine interest-bearing debt most likely will include steps that require:

Vouching borrowing and repayment transactions