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?