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wsrdpc
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32791
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acct 241 ch 10
Updated:
2010-09-10 21:29:13
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acct
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acct 241 ch 10
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  1. A clause in a loan agreement that is intended to keep the borrow's financial position at the same level it was when the loan was made is called a
    A. collateral
    B. indenture
    C. loan covenant
    D. guarantee
    C. loan covenant
    (this multiple choice question has been scrambled)
  2. Sales of capital stock and large debt financing transactions are usually authorized by
    A. the board of directors
    B. the shareholders
    C. management
    D. the transfer agent
    A. the board of directors
    (this multiple choice question has been scrambled)
  3. Company bonds and stocks are normally handled by an intermediary called a
    A. broker
    B. transfer agent
    C. trustee
    D. registar
    B. transfer agent
    (this multiple choice question has been scrambled)
  4. Controls over making estimates include all of the following except
    A. consideration of whether estimates are consistent with the company's operation plans
    B. comparison of prior estimates with subsequent results
    C. ensuring the effects of the estimate are in line with analysts forecasts
    D. management communications of the need for proper accounting estimates
    C. ensuring the effects of the estimate are in line with analysts forecasts
    (this multiple choice question has been scrambled)
  5. Inspecting marketable securities provides primary evidence about the ASB balance assertion of
    A. valuation
    B. rights and obligations
    C. existence
    d. all of the above
    C. existence
    (this multiple choice question has been scrambled)
  6. Hedging refers to
    A. using derivatives to protect companies from market uncertainties
    B. using derivatives for market speculation
    C. management not giving direct answers in their representations
    D. calculating goodwill impairment
    A. using derivatives to protect companies from market uncertainties
    (this multiple choice question has been scrambled)
  7. If market prices are not readily available for fair value measurements, management should use
    A. their own assumptions as long as there are no contrary data
    B. historical costs
    C. the previous year's value
    D.auditors' best estimates
    A. their own assumptions as long as there are no contrary data
    (this multiple choice question has been scrambled)
  8. Goodwill impairment refers to
    A. a permanent decline in value of recorded goodwill
    B. the amount of amortization
    C. a need for increased professional skepticism
    D. loss of trust from customers
    A. a permanent decline in value of recorded goodwill
    (this multiple choice question has been scrambled)
  9. Estimates in the finance and investment cycle include
    a. probability of a correlated hedge
    b. classification of equity investments
    c. actuarial assumptions for pension costs
    d. all of the above
    d. all of the above
  10. Financial planning usually starts with the
    A. authorization of stock sale or debt financing
    B. cash flow forecast
    C. capital budget
    d. none of the above
    B. cash flow forecast
    (this multiple choice question has been scrambled)
  11. In determining the effectiveness of an entity's policies and procedures relating to the existence or occurrence assertion for payroll transactions, an auditor most likely would inquire about and:
    A. re compute the payroll deductions for employee fring benefits
    B. inspect evidence of accounting for pre-numbered payroll checks
    C. verify the preparation of the monthly payroll account bank reconciliation
    D. observe the segregation of duties concerning personnel responsibilities and payroll disbursement
    D. observe the segregation of duties concerning personnel responsibilities and payroll disbursement
    (this multiple choice question has been scrambled)
  12. 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?
    A. comparing recorded dividends with amounts appearing on federal information Form 1099
    B. utilizing analytical procedures and statistical sampling
    C. comparing recorded dividends with a standard financial reporitng service's record of dividends
    D. tracing recorded dividend income to cash receipts records and validated deposit slips
    C. comparing recorded dividends with a standard financial reporitng service's record of dividends
    (this multiple choice question has been scrambled)
  13. When a large amount of negotiable securities is held by the client, auditors need to plan to guard against:
    A. substitution of securities already counted for other securities that should be on hand but are not
    B. unrecorded sales of securities after they are counted
    C. subsitution of authentic securities with counterfeit securities
    D. unauthorized negotiation of the securities before they are counted
    A. substitution of securities already counted for other securities that should be on hand but are not
    (this multiple choice question has been scrambled)
  14. In connection with the audit of an issue of long term bonds payable, the auditor should:
    A. decide whether the bond issue was made without violating state or local law
    B. calculate the effective interest rate to see if it is substantially the same as the rates for similar issues
    C. ascertain that the client has obtained the opinion of counsel on the legality of the issue
    D. determine whether bondholders are persons other than owners, directors, or officers of the company issuing the bond
    C. ascertain that the client has obtained the opinion of counsel on the legality of the issue
    (this multiple choice question has been scrambled)
  15. Which of the following is the most important audit consideration when examining the stockholders' equity section of a client's balance sheet?
    A. stock dividends are capitalized at par or stated value on the dividend declaration date
    B. stock dividends and stock splits during the year under audit were approved by the stockholders
    C. entries in the capital stock account can be traced to resolutions in the minutes of meetings of the board of directors
    D. changes in the capital stock account are verified by an independent stock transfer agent
    C. entries in the capital stock account can be traced to resolutions in the minutes of meetings of the board of directors
    (this multiple choice question has been scrambled)
  16. If the auditor discovers that the carrying amount of a client's invsetments is overstated because of a loss in value that is other than a temporary decline in market value, the auditor should insist that:
    A. the loss in value is recognized in the financial statements
    B. the investments are classified as long term for balance sheet purposes with full disclosure in the footnotes
    C. the equity section of the balance sheet separately shows a charge equal to the amount of the loss
    D. the approximate market value of the investments is shown in parentheses on the face of the balance sheet
    A. the loss in value is recognized in the financial statements
    (this multiple choice question has been scrambled)
  17. The primary reason for preparing a reconciliation between interest bearing obligations outstanding during the year and interest expense in the financial statements is to:
    A. ascertain the reasonableness of imputed interest
    B. determine the validity of prepaid interest expense
    C. detect unrecorded liabilities
    D. evaluate internal control over securities
    C. detect unrecorded liabilities
    (this multiple choice question has been scrambled)
  18. The auditor should insist that a representative of the client be present during the inspection and count of securities to:
    A. coordinate the return of all securities to proper locations
    B. detect forged securities
    C. acknowledge the receipt of securities returned
    D. lend authority to the auditor's directives
    C. acknowledge the receipt of securities returned
    (this multiple choice question has been scrambled)
  19. When independent stock transfer agents are not employed and the corporation issues its own stock and maintains stock records, canceled stock certificates should:
    A. be destroyed to prevent fraudulent re-issuance
    B. not be defaced, but segregated from other stock certificates and retained in a canceled certificates file
    C. be defaced and sent to the Secretary of State
    D. be defaced to prevent re-issuance and attached to their corresponding stubs
    D. be defaced to prevent re-issuance and attached to their corresponding stubs
    (this multiple choice question has been scrambled)
  20. When a clent company does not maintain its own capital stock records, the auditor should obtain written confirmation from the transfer agent and registrar concerning:
    A. guarantees of preferred stock liquidation value
    B. the number of shares issued and outstanding
    C. the number of shares subject to agreements to repurchase
    D. restrictions on the payment of dividends
    B. the number of shares issued and outstanding
    (this multiple choice question has been scrambled)
  21. All corporate capital stock transactions should ultimately be traced to the:
    A. cash disbursements journal
    B. cash receipts journal
    C. numbered stock certificates
    D. minutes of meetings of the baord of directors
    D. minutes of meetings of the baord of directors
    (this multiple choice question has been scrambled)
  22. An audit program for the examination of the retained earnings account should include a step that requires verification of the (choose 2 steps)
    A. authorization for both cash and stock dividends
    B. approval of the adjustment to the beginning balance as a result of a write down of accounts receivable
    C. gain or loss resulting from disposition of treasury shares
    D. market value used to charge retained earnings to account for a 2 for 1 stock split
    A. authorization for both cash and stock dividends

    d. gain or loss resulting from disposition of treasury shares
    (this multiple choice question has been scrambled)
  23. When a entity uses a trust company as custodian of its marketable securites, the possibility of concealing fraud most likely would be reduced if the:
    A. interest and dividend checks are mailed directly to an entity employee who is authorized to sell
    B. securities are registered in the name of the trust comapny, rather than the entity itself
    C. trust company places the securties in a bank safe-depost vault under the custodian's exclusive control
    D. trust company has no direct contact with the entity empoloyees responsible for maintain investment accounting records
    D. trust company has no direct contact with the entity empoloyees responsible for maintain investment accounting records
    (this multiple choice question has been scrambled)
  24. An auditor would most likely verify the interest earned on bond investments by:
    A. recomputing the interest earned on the basis of face amount, interest rate, and period held
    B. confirming the bond interest rate with the issuer of the bonds
    C. testing internal controls relevant to cash receipts
    D. vouching the receipt and deposit of interest checks
    A. recomputing the interest earned on the basis of face amount, interest rate, and period held
    (this multiple choice question has been scrambled)
  25. A client has a large and active investment portfolio that is kept in bank safe deposit box. If the auditor is unable to count securities at the balance sheet date, the auditor most likely will:
    A. count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance sheet date
    B. examine supporting evidence for transactions occurring during the year
    C. request the client to have the bank seal the safe-deposit box until the auditor can count the securities at a subsequent date
    D. request the bank to confirm to the auditor the contents of the safe-deposit box at the balance sheet date
    C. request the client to have the bank seal the safe-deposit box until the auditor can count the securities at a subsequent date
    (this multiple choice question has been scrambled)
  26. An auditor testing long-term investments would ordinarily use analytical procedures to ascertain the resonableness of the:
    A. classification as available for sale or trading securities
    B. completeness of recorded investment income
    C. valuation of trading securities
    D. existence of unrealized gains or losses
    B. completeness of recorded investment income
    (this multiple choice question has been scrambled)
  27. In auditing for unrecorded long term bonds payable, an auditor most likely will:
    A. compare interest expense with the bonds payable amount of reasonableness
    B. examine documentation of assets purchased with bond proceeds for liens
    C. confirm the existence of individual bondholders at year end
    D. perform analytical procedures on the bond premium and discount accounts
    A. compare interest expense with the bonds payable amount of reasonableness
    (this multiple choice question has been scrambled)
  28. An auditor's program to examine long term debt most likely would include steps that require:
    A. verifying the existence of the holders of the debt by direct confirmation
    B. correlating interest expense recorded for the period with outstanding debt
    C. inspecting the accounts payable subsidiary ledge for unrecorded long term debt
    D. comparing the carrying amount of held to maturity securities with their year end market values
    B. correlating interest expense recorded for the period with outstanding debt
    (this multiple choice question has been scrambled)
  29. Which of the following questions would an auditor most likely include on an internal control questionnaire for notes payable?
    A. Are the proceeds from notes payable used for the purpose of noncurrent assets?
    B. Are 2 or more authorized signatures required on checks that repay notes payable?
    C. Are direct borrowings on notes payable authorized by the board of directors?
    D. Are assets the collateralize notes payable critically needed for the entity's continued existence?
    C. Are direct borrowings on notes payable authorized by the board of directors?
    (this multiple choice question has been scrambled)
  30. An auditor's purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely to obtain evidence concerning management's assertions about:
    A. completeness
    B. presentation and disclosure
    C. valuation or allocation
    D. existence or occurrence
    C. valuation or allocation
    (this multiple choice question has been scrambled)