Audit Final

1.

1 point

Which of these substantive procedures is not used to obtain evidence about contingencies?

Obtaining a letter from the client's attorney.

Examining terms of sale in sales contracts.

Scanning expense accounts for credit entries.

Reading the minutes of the board of directors’ meetings.

2.

1 point

Which of the following substantive procedures would auditors most likely perform to obtain evidence about the occurrence of subsequent events?

Investigate changes in shareholders' equity occurring after the date of the financial statements.

Send confirmations to vendors with whom the client normally does business but for which no balance in accounts payable is noted.

Recompute a sample of large-dollar transactions occurring after the date of the financial statements for arithmetic accuracy.

Confirm bank accounts established after the date of the financial statements.

3.

1 point

Which audit procedure is best suited for the assertion that recorded investments represent investments actually owned at the balance-sheet date?

Trace investment transactions to minutes of the board of directors meetings to determine that transactions were properly authorized.

Examine supporting documents for a sample of investment transactions to verify that prenumbered documents are used.

Obtain positive confirmations as of the balance sheet date of investments held by independent custodians.

Verify that transfers from the trading portfolio to the held-to-maturity investment portfolio have been properly recorded.

4.

1 point

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

Compare valuation of stock to published market prices.

Obtain management representation about number of shares issued and outstanding.

Read board of directors’ minutes for authorization of equity transactions.

Confirm outstanding common and preferred stock with stock registrar.

5.

1 point

Which of the following is not required by GAAS?

Written Representations

Engagement Letter

Management Letter

Attorney Letter

6.

1 point

Which of the following questions would auditors most likely include on an internal control questionnaire for notes payable?

Are assets that collateralize notes payable critically needed for the entity’s continued existence?

Are the proceeds from notes payable used for the purchase of noncurrent assets?

Are two or more authorized signatures required on checks that repay notes payable?

Are direct borrowings on notes payable authorized by the board of directors?

7.

1 point

An audit plan to examine long-term debt most likely would include steps that require

Comparing the carrying amount of held-to-maturity securities with their year-end market values.

Correlating interest expense recorded for the period with outstanding debt.

Verifying the existence of the holders of the debt by direct confirmation.

8.

1 point

Which of the following substantive procedures should auditors ordinarily perform regarding subsequent events?

Communicate material weaknesses in internal control to the client's audit committee.

Send second requests to the client’s customers who failed to respond to initial accounts receivable confirmation requests.

Review the cutoff bank statements for several months after the date of the financial statements.

Compare the latest available interim financial statements with the financial statements being audited.

9.

1 point

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 client’s 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 had 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?

There had been unauthorized buying and selling of investment securities.

The securities may be misclassified on the balance sheet.

ABC Company no longer owns the securities.

The certificates in the safe deposit box were forgeries.

10.

1 point

Which of the following is ordinarily performed last in the audit examination?

Obtaining signed written representations

Performing a review for subsequent events

Performing tests of controls

Securing a signed engagement letter from the client

11.

1 point

A charge following the date of the financial statements to a notes receivable account from the cash disbursements journal should alert auditors to the possibility that a

Contingent liability has become a real liability and has been settled.

Contingent asset has come into existence following the date of the financial statements.

Contingent liability has come into existence following the date of the financial statements.

Provision for contingencies is required.

12.

1 point

Which audit procedure is best suited for the assertion that investments are properly valued at the balance-sheet date?

Examine supporting documents for a sample of investment transactions to verify that prenumbered documents are used.

Determine whether any other-than-temporary impairments in the carrying value of investments have been properly recorded.

Determine whether employees who are authorized to sell investments have access to cash.

Obtain positive confirmations as of the balance sheet date of investments held by independent custodians.