Question 1

The typical business activity of the finance and investment cycle would not include

Accepted Answer

A)   Proposals for cash forecasts, capital budgets, and business expansion.
B)   Analyses of excess cash funds.
C)   Reconciliation of cash.
D)   Sale of stocks, bonds, or notes.E) A) and C)
F) A) and D)

Question 2

Selecting a sample of paid notes and tracing interest to the general ledger account is a test of the PCAOB assertion for

Accepted Answer

A)   Accounting.
B)   Valuation or allocation.
C)   Completeness.
D)   Existence or occurrence.E) A) and B)
F) A) and C)

Question 3

The ASB balance assertion of _____________________________ is paramount in the verification of long-term liabilities and determination that all liabilities are recorded.

Accepted Answer

The answer of The ASB balance assertion of _____________________________ is...

Question 4

Loan covenants are used for which of the following reasons?

Accepted Answer

A)   To protect the lender from the borrower substantially weakening the borrower's financial position.
B)   To protect the borrower from the lender calling the loan early.
C)   To protect the auditors from false information by the borrower.
D)   To protect shareholders from management taking on too much debt.E) A) and D)
F) A) and C)

Question 5

If it would be appropriate to confirm capital stock,the auditor would obtain the confirmation from

Accepted Answer

A)   Management.
B)   The board of directors.
C)   Stockholders.
D)   An independent registrar.E) A) and B)
F) None of the above

Question 6

Documenting ownership of bonds can be handled by a trustee having duties and responsibilities similar to those of registrars and transfer agents.

Accepted Answer

A) True 
 B)False

Question 7

_______________________________ is responsible for making estimates and should have a _____________________________ and _____________________________ designed to reduce the likelihood of material misstatements in them.

Accepted Answer

Client's m...

Question 8

What is a compensating control? Describe what type of compensating controls might be implemented in the finance and investment cycle.

Accepted Answer

A compensating control is a control acti...

Question 9

The segregation of functional responsibilities is relatively easy for the finance and investment cycle.

Accepted Answer

A) True 
 B)False

Question 10

Auditors count investment securities held by the client primarily to test the ASB balance assertion of

Accepted Answer

A)   Existence.
B)   Rights and obligations.
C)   Completeness.
D)   Valuation.E) A) and C)
F) B) and D)

Question 11

When auditing the market value of an investment,an auditor would be least likely to

Accepted Answer

A)   Examine quoted market prices.
B)   Evaluate management's procedure for determining market prices.
C)   Make his or her own determination of market prices.
D)   Confirm market prices with a broker.E) A) and C)
F) C) and D)

Question 12

The typical assertion relating to investments and related accounts in a manufacturing company would not include the assertion that

Accepted Answer

A)   All investments are valued at cost.
B)   Investment securities are on hand or held in safekeeping by a trustee.
C)   Investment income has been received and recorded.
D)   Investments are adequately classified and described in the balance sheet, including disclosures.E) B) and C)
F) A) and D)

Question 13

An ___________________________________ is an approximation of a financial statement element,item,or account.

Accepted Answer

The answer of An ___________________________________ is an approximation of a...

Question 14

Compensating controls in the finance and investment cycle

Accepted Answer

A)   Feature separation of duties by upper management.
B)   Feature involvement of two or more persons handling all important responsibilities.
C)   Include involvement by the external auditor.
D)   Include all the above.E) B) and D)
F) None of the above

Question 15

Records of interest rates and bonds payable are maintained by the _____________________________ and the ____________________________.

Accepted Answer

accounting...

Question 16

Which of the following is not an off-balance-sheet item?

Accepted Answer

A)   Purchase commitment.
B)   Capitalized lease.
C)   Loan commitment.
D)   Synthetic lease.E) A) and C)
F) C) and D)

Question 17

Which of the following is not a relevant aspect of internal controls over estimates?

Accepted Answer

A)   External auditor involvement in developing assumptions.
B)   Adequate review by appropriate levels of authority.
C)   Comparison of prior estimates with subsequent results.
D)   All the above are relevant aspects of internal controls over estimates.E) None of the above
F) All of the above

Question 18

Tests of controls in the finance and investment cycle

Accepted Answer

A)   Normally focus on tests of transactions.
B)   Primarily involve observing physical security of assets.
C)   Typically amount to inquiries and observations related to management involvement.
D)   Can significantly reduce the extent of substantive tests.E) A) and C)
F) A) and D)

Question 19

To determine whether facts support management's intent to hold securities to maturity,an auditor might

Accepted Answer

A)   Study the entity's cash flow forecasts.
B)   Obtain published market quotations.
C)   Compare fair value of the securities to cost.
D)   Confirm that the securities are held by a broker.E) B) and C)
F) A) and C)

Question 20

Which of the following is not a substantive audit procedure for estimates of management?

Accepted Answer

A)   Recalculating the mathematical estimate.
B)   Observing whether estimates are prepared by qualified personnel.
C)   Developing an independent estimate based on alternative assumptions.
D)   Comparing the estimates of management to subsequently discovered facts before the end of fieldwork.E) B) and D)
F) None of the above

Exam 10: Finance and Investment Cycle

Which of the following is not a relevant aspect of internal controls over estimates?

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Which of the following is not an off-balance-sheet item?

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Records of interest rates and bonds payable are maintained by the _____________________________ and the ____________________________.

Correct Answerverifiedaccounting...View AnswerShow Answer

The typical assertion relating to investments and related accounts in a manufacturing company would not include the assertion that

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The ASB balance assertion of _____________________________ is paramount in the verification of long-term liabilities and determination that all liabilities are recorded.

Correct AnswerverifiedShow Answer

Which of the following is not a substantive audit procedure for estimates of management?

Correct AnswerverifiedShow Answer

To determine whether facts support management's intent to hold securities to maturity,an auditor might

Correct AnswerverifiedShow Answer

The typical business activity of the finance and investment cycle would not include

Correct AnswerverifiedShow Answer

When auditing the market value of an investment,an auditor would be least likely to

Correct AnswerverifiedShow Answer

The segregation of functional responsibilities is relatively easy for the finance and investment cycle.

Correct AnswerverifiedShow Answer

Auditors count investment securities held by the client primarily to test the ASB balance assertion of

Correct AnswerverifiedShow Answer

What is a compensating control? Describe what type of compensating controls might be implemented in the finance and investment cycle.

Correct AnswerverifiedA compensating control is a control acti...View AnswerShow Answer

Loan covenants are used for which of the following reasons?

Correct AnswerverifiedShow Answer

_______________________________ is responsible for making estimates and should have a _____________________________ and _____________________________ designed to reduce the likelihood of material misstatements in them.

Correct AnswerverifiedClient's m...View AnswerShow Answer

Selecting a sample of paid notes and tracing interest to the general ledger account is a test of the PCAOB assertion for

Correct AnswerverifiedShow Answer

Compensating controls in the finance and investment cycle

Correct AnswerverifiedShow Answer

If it would be appropriate to confirm capital stock,the auditor would obtain the confirmation from

Correct AnswerverifiedShow Answer

An ___________________________________ is an approximation of a financial statement element,item,or account.

Correct AnswerverifiedShow Answer

Tests of controls in the finance and investment cycle

Correct AnswerverifiedShow Answer

Documenting ownership of bonds can be handled by a trustee having duties and responsibilities similar to those of registrars and transfer agents.

Correct AnswerverifiedShow Answer

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Records of interest rates and bonds payable are maintained by the _ and the .

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A compensating control is a control acti...
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_________________ is responsible for making estimates and should have a _ and _______________ designed to reduce the likelihood of material misstatements in them.

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Client's m...
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