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1

Who should have control over the authorization of corporate bonds?
A)Controller.
B)Treasurer.
C)President/CEO.
D)Board of Directors.
2

Which of the following is least likely to be included in the audit program for debenture bonds?
A)Examine security pledged relating to the loan.
B)Confirm.
C)Review bonds paid during period.
D)Perform analytical procedures.
3

Which of the following is the most likely reason why auditors often set control risk at a high level for bonds?
A)Small number of transactions per year.
B)Use of bond certificate book.
C)Outside investors monitor payments.
D)All transactions are approved by board of directors.
4

An auditor has calculated the interest paid on a company's recorded bonds and found the interest paid was 10%; in examining the bonds he notes that they are 8% bonds sold without a premium or a discount. Which of the following is most likely?
A)Understated debt outstanding.
B)Understated interest expense.
C)Overstated common stock.
D)Overstated accrued interest receivable.
5

An audit found that $10,000,000 of long term debt on the financial statements will become due in 6 months. The financial statement assertion that must be addressed in determining that the proper amount of debt is included as current is:
A)Existence.
B)Completeness.
C)Rights.
D)Presentation.
6

For a large publicly traded client the auditors' examination of capital stock accounts will not ordinarily include:
A)Analysis of capital stock accounts.
B)Confirmation of shares issued with the independent registrar.
C)Accounting for the proceeds of a major stock issuance.
D)Reconciliation of a stock certificate book with the general ledger.
7

An audit program for the examination of the retained earnings account should include a step that requires the verification of the:
A)Market value used to charge retained earnings to account for a two-for-one stock split.
B)Approval of the adjustment of the beginning balance as a result of a write-down of an account receivable.
C)Authorization for both cash and stock dividends.
D)Gain or loss resulting form disposition of treasury shares.
8

When verifying dividend amounts paid, an auditor will typically do all except which of the following?
A)Determine dates and amounts of dividends paid.
B)Send confirmations to shareholders to verify payments.
C)Examine arrearages of preferred stock dividends.
D)Examine treatment of unclaimed dividends.
9

When a corporation has convertible debentures or stock options, which of the following procedures should the auditor perform?
A)Verify that dividends paid are being held in a secured account.
B)Determine that enough shares are held in reserve to fulfill the obligations.
C)Determine that all stock options and convertible debentures have been recorded in the stockholder ledger.
D)Confirm options and debentures with stock transfer agent.
10

The primary responsibility of the stock transfer agent is which of the following?
A)Maintenance of detailed stockholder records.
B)Maintenance of stock certificate book.
C)Maintenance of stockholder ledger.
D)Monitor stock issuance so that stock is sold on a timely basis.







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