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Chapter 19: Audit of the Capital...
Post-Test

1 .       The auditor is concerned with establishing that dividends are paid to client-corporation stockholders owning stock as of the  



2 .       An audit program for the examination of the retained earnings account should include a step that requires verification of the  



3 .       In connection with the examination of bonds payable, an auditor would expect to find in a trust indenture  



4 .       Which of the following is the most important consideration of an auditor when examining the stockholders' equity section of a client's balance sheet?  



5 .       Which of the following would provide the best form of evidence pertaining to the annual valuation of a long-term investment in which the independent auditor’s client owns a 30 percent voting interest?  



6 .       During the course of an audit, an auditor observes that the recorded interest expense seems to be excessive in relation to the balance in the long-term debt account. This observation could lead the auditor to suspect that 



7 .       The auditor's program for the examination of long-term debt should include steps that require the 



8 .       The primary reason for preparing a reconciliation between interest-bearing obligations outstanding during the year and interest expense presented in the financial statements is to 



9 .       Which of the following is not a document in which shareholders' equity transactions are recorded? 



10 .       Which of the following is the most important consideration of an auditor when examining the shareholders' equity section of a client's balance sheet? 



11 .       All corporate share capital transactions should ultimately be traced to the 



12 .       During an audit of an entity's shareholders' equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or statute. This audit procedure most likely is intended to verify management's assertion of 



13 .       An auditor is most likely to inspect loan agreements under which an entity's inventories are pledged to support management's financial statement assertion of 



14 .       In auditing long-term bonds payable, an auditor is most likely to 



15 .       An audit of shareholders' equity ordinarily should include 



16 .       The audit procedure "examine notes paid after year-end to determine whether they were liabilities at the balance sheet date" is performed when verifying the existence objective for notes payable. [Hint]

 
 


17 .       The audit procedure "recalculate accrued interest" is performed when verifying the accuracy objective for notes payable. [Hint]

 
 


18 .       The audit procedure "examine notes payable, minutes, and bank confirmations for restrictions" is performed when verifying the presentation and disclosure objective for notes payable. [Hint]

 
 


19 .       The New York Stock Exchange requires each listed company to have one of its employees serve as a stock registrar to assure the proper issuance of stock certificates. [Hint]

 
 


20 .       Because the issuance, and repurchase, of capital stock is usually a material transaction, board approval authorizing these transactions is generally required. [Hint]

 
 


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