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Chapter 15 - Debt and Equity Capital Chapter 15 Debt and Equity Capital True / False Questions 1. The formal documentation creating bond indebtedness is called the indenture. True False 2. Registered bondholders receive periodic interest payments without any action on their part. True False 3. The auditors are required to confirm bond holdings directly with the bondholders. True False 4. The auditors should determine that the issuance of bonds was approved by the company's stockholders. True False 5. Long-term liabilities that are maturing must always be classified as a current liability. True False 6. Corporations maintain either a stock certificate book or a stockholders' ledger. True False 7. Dividends should be authorized by the stockholders of the corporation. True False 15-1 Chapter 15 - Debt and Equity Capital 8. The auditors generally refer to provisions in the partnership agreement when auditing the allocation of partnership income. True False 9. When an independent registrar and stock transfer agent is used, it is likely that the auditor will confirm the number of shares outstanding with those parties rather than the shareholders. True False 10. For a continuing client, the auditors will often find that audit time required for capital stock is small in relation to the dollars recorded in the accounts. True False Multiple Choice Questions 11. A registrar/transfer agent system relating to capital stock is most likely used by: A. A small, nonpublic company. B. A large, publicly traded company. C. All companies must use this type of system. D. No companies use this system anymore. 12. In auditing long-term debt, an auditor would be most likely to: A. Perform analytical procedures on the bond prenumbered discount accounts. B. Examine documentation of assets purchased with bond proceeds for liens. C. Compare interest expense with the long-term debt amount for reasonableness. D. Confirm the existence of individual long-term debt holders at year-end. 13. An auditor obtains evidence of stockholders' equity transactions for a publicly traded company by reviewing the entity's: A. Minutes of board of directors meetings. B. Registrar's record of interbank transfers. C. Canceled stock certificates. D. Treasury stock certificate book. 15-2 Chapter 15 - Debt and Equity Capital 14. Which of the following most likely would approve the issuance of notes payable? A. Controller. B. Payroll. C. Personnel. D. Treasurer. 15. Internal control over bonds payable is best when: A. The company utilizes the services of a bond trustee. B. The company segregates approval from issuance of the bonds. C. Bonds are countersigned by two officers. D. Bonds are serially numbered.... View Full Document

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