AUDIT OF LONG TERM LIABILITIES

Question 1

What is the primary objective of ensuring internal controls over long-term liabilities (LTL)?

Answer 1

To ensure that the company’s internal controls for managing long-term liabilities are strong and effective to prevent errors and fraud.

Question 2

Why is it important to ensure transactions for interest and principal involving LTL are properly authorized and recorded?

Answer 2

Ensures that all transactions are authorized, correctly recorded, and accurately reported in the financial statements.

Question 3

What are the audit assertions covered by verifying the authorization and recording of LTL transactions?

Answer 3

Occurrence, Authorization, Completeness, Valuation, and Disclosure & Presentation.

Question 4

What does verifying the completeness of LTL transactions involve?

Answer 4

Ensuring all transactions and balances related to long-term liabilities are recorded in the financial statements.

Question 5

What does the valuation assertion ensure regarding LTL?

Answer 5

Long-term liabilities are recorded at the correct amounts

Question 6

What procedures are involved in verifying the occurrence and authorization of LTL transactions?

Answer 6

Checking loan agreements

Question 7

How do auditors check the completeness of LTL transactions?

Answer 7

By reconciling the company’s debt records with the financial statements

Reviewing bank statements for unrecorded liabilities.

Question 8

What procedures help auditors verify the valuation of LTL?

Answer 8

Checking calculations of interest and principal amounts

Question 9

What is the primary objective for the completeness of share capital transactions?

Answer 9

Ensure all share capital transactions that have occurred are included in the financial records to prevent understatement.

Question 10

Why is it important to verify the existence and accuracy of recorded share capital?

Answer 10

To confirm that the equity shown on the balance sheet is genuine and accurately valued.

Question 11

What is the objective for ensuring the occurrence of share capital transactions?

Answer 11

Confirm that any new shares issued were properly approved and recorded to prevent unauthorized share issuance.

Question 12

What is the objective for the presentation and disclosure of share capital?

Answer 12

Ensure share capital is correctly classified and adequately described in the financial statements for transparency and compliance.

Question 13

What does the completeness assertion ensure regarding share capital transactions?

Answer 13

Transactions involving share capital have been recorded in the company’s financial records.

Question 14

What procedures are involved in verifying the completeness of share capital transactions?

Answer 14

Review minutes of board meetings, confirm with the share register, and inspect share certificates.

Question 15

What does the existence and accuracy assertion ensure for share capital?

Answer 15

The recorded share capital exists and the amounts recorded in the financial statements are correct.

Question 16

What audit procedures help verify the existence and accuracy of share capital?

Answer 16

Inspect share certificates, confirm with shareholders, and reconcile the share register with the general ledger.

Question 17

What does the occurrence assertion ensure for share capital transactions?

Answer 17

Any issuance of shares was properly authorized and the transactions are valid.

Question 18

What procedures are involved in verifying the occurrence of share capital transactions?

Answer 18

Check authorization documents, inspect issuance documents, and review regulatory filings

Question 19

What does the presentation and disclosure assertion ensure for share capital?

Answer 19

Share capital is appropriately classified and disclosed in the financial statements.

Question 20

What audit procedures ensure proper presentation and disclosure of share capital?

Answer 20

Review financial statements to ensure correct classification and verify notes for necessary disclosures.

Question 21

What is an example of a procedure to ensure the completeness of share capital?

Answer 21

Compare the number of shares recorded in the share register with the general ledger.

Question 22

What is an example of a procedure to ensure the existence and accuracy of share capital?

Answer 22

Send confirmations to shareholders to verify their shareholdings.

Question 23

What is an example of a procedure to ensure the occurrence of share capital transactions?

Answer 23

Review board resolutions and meeting minutes to confirm the approval of share issuances.

Question 24

What is an example of a procedure to ensure proper presentation and disclosure of share capital?

Answer 24

Check the notes to the financial statements for adequate disclosure of share capital information.

Question 25

What is the primary concern for auditors regarding items in the Income Statement?

Answer 25

Ensure that items in the Income Statement are not materially misstated.

Question 26

Why is the primary concern of auditors regarding Income Statement items important?

Answer 26

Misstatements can mislead users about the company’s profitability and performance.

Question 27

What is the matching principle in the context of auditing the Income Statement?

Answer 27

Expenses should be matched with the revenues

Question 28

What does consistency mean in auditing the Income Statement?

Answer 28

The company should apply accounting principles consistently from one period to the next.

Question 29

What is an example of a procedure to ensure the occurrence of Income Statement transactions?

Answer 29

Examine supporting documents for revenue and expense transactions

Question 30

What is an example of a procedure to ensure the accuracy of Income Statement transactions?

Answer 30

Perform independent calculations to verify the accuracy of amounts recorded in the financial statements.

Question 31

What is an example of a procedure to ensure the cutoff of Income Statement transactions?

Answer 31

Review transactions around the period

Question 32

What is an example of a procedure to ensure the classification and presentation of Income Statement transactions?

Answer 32

Check the notes to the financial statements for adequate disclosure of transaction information.