financial audit 2

The auditor's primary concern relative to presentation and disclosure-related objectives is

• accuracy.

• existence.

• completeness.

• occurrence.

Which of the following is an accurate statement regarding presentation and disclosure?

• Auditors generally set the risk as low that all required information may not be completely disclosed in the footnotes.

• Audit tests performed in earlier audit phases provides sufficient appropriate evidence about contingent liabilities and subsequent events.

• Auditors do not conduct tests of controls related to disclosures when the initial assessment of control risk is below maximum.

• In phase IV (completing the audit), auditors evaluate whether the overall presentation of the financial statements and related footnotes complies with accounting standards.

Which of the following departments is most likely responsible for pay rate changes and changes in deductible amounts for employees?

• general accounting department

• human resources department

• treasurer

• controller

The primary concern in determining whether retained earnings is correctly disclosed on the balance sheet is

• correct calculation of the net income or loss for the year.

• correct calculation of dividend payments for the year.

• whether prior-period adjustments have been made correctly.

• whether there are any restrictions on the payment of dividends.

When verifying if capital stock is accurately recorded,

• the ending balance in the account does not need to verified.

• the number of shares outstanding at the balance sheet date is verified by examining the corporate minutes.

• the recorded par value can be determined by multiplying the number of shares by the market price of the stock.

• a confirmation from the transfer agent is the simplest way to verify the number of shares outstanding at the balance sheet date.

Which of the following statements is correct regarding the audit of dividends?

• The emphasis is on the ending balance in the dividends account.

• When auditors verify that the dividends are paid to stockholders that exist, they are concerned with the completeness objective.

• If the client uses a transfer agent to disburse dividends, the total can be traced to a cash disbursement entry to the agent and also confirmed.

• All of the above are correct statements.

When conducting the audit of stockholders' equity, it is normal practice to verify all capital stock transactions

• only when the client is small.

• that are in excess of a material amount.

• if there aren't very many during the year.

• regardless of the controls in existence, because of their materiality and permanence in the records.

If a company employs a capital stock registrar and/or transfer agent, the registrar or agent, or both, should be requested to confirm directly to the auditor the number of shares of each class of stock

• surrendered and canceled during the year.

• authorized at the balance sheet date.

• issued and outstanding at the balance sheet date.

• sold at a price above par during the year.

An imprest petty cash fund would least likely be used to pay for which of the following items?

• minor office supplies

• monthly interest expense

• stamps for small mailings

• small contributions to a local charity

An imprest petty cash fund

• is a bank account.

• is used for large, unusual purchases.

• is usually reimbursed at least once a week for good internal control.

• is being replaced by pre-approved purchase cards in many companies.