Chapter22 - final

Auditing and Assurance Services (12th Edition)

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CHAPTER 22 Multiple-Choice Questions 1. easy b Which of the following statements is correct? a. Bonds are frequently issued by companies in small amounts. b. There are relatively few transactions in the capital acquisition and repayment cycle, and each transaction is typically highly material. c. A primary emphasis in auditing debt is on existence. d. All of the above are correct. 2. easy c The capital acquisition and repayment cycle does not include: a. payment of interest. b. payment of dividends. c. payment of vendor invoices. d. acquisition of capital through interest-bearing debt. 3. easy b Which of the following is not an objective of the auditor’s examination of notes payable? a. To determine whether internal controls are adequate. b. To determine whether client’s financing arrangements are effective and efficient. c. To determine whether transactions regarding the principal and interest of notes are properly authorized. d. To determine whether the liability for notes and related interest expense and accrued liabilities are properly stated. 4. easy c Which of the following statements regarding the capital acquisition and repayment cycle is true? a. Few transactions affect the cycle, and most are smaller amounts. b. Large numbers of transactions affect the cycle, and most are smaller amounts. c. Few transactions affect the cycle, and most are highly material. d. None of the above is true. 5. easy a The primary focuses of the audit of debt are: a. accuracy and completeness. b. accuracy and existence. c. completeness and valuation. d. accuracy and valuation. 6. easy a Responsibility for the issuance of new notes payable should be vested in the: a. board of directors. b. purchasing department. c. accounting department. d. accounts payable department. 7. easy c Which of the following accounts is not audited within the capital acquisition and repayment cycle? a. Notes payable. b. Interest expense. c. Accounts payable. d. Bonds payable. 22-1
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8. easy c The auditor’s independent estimate of interest expense, using average notes payable outstanding and average interest rates, tests: a. the reasonableness of interest expense. b. for omitted notes payable. c. both a and b. d. none of the above. 9. easy c The tests of details of balances procedure which requires the auditor to trace the totals of the notes payable list to the general ledger satisfies the objective of: a. accuracy. b. existence. c. detail tie-in. d. completeness. 10. easy b The audit objective to determine that notes payable in the schedule actually exist is verified by the test of details of balances procedure to: a. foot the notes payable list. b. confirm notes payable. c. recalculate interest expense.
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Chapter22 - final - CHAPTER 22 Multiple-Choice Questions 1....

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