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