Deck 8

Question 1

In establishing the existence and ownership of long-term investments in the form of publicly traded stock, an auditor most likely would inspect the securities or

Answer 1

Confirm the number of shares owned that are held by an independent custodian

Question 2

In testing long-term investments, an auditor ordinarily would use analytical procedures to ascertain the reasonableness of the

Answer 2

Completeness of recorded investment income

Question 3

To satisfy the valuation assertion when auditing an investment accounted for by the equity method, an auditor most likely would

Answer 3

Examine the audited financial statements of the investee company

Question 4

A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the auditor is unable to count the securities at the balance sheet date, the auditor most likely will

Answer 4

Request the client to have the bank seal the safe deposit box until the auditor can count the securities at a subsequent date.

Question 5

An auditor testing long-term investments would ordinarily use analytical procedures to ascertain the reasonableness of the

Answer 5

Completeness of recorded investment income

Question 6

In testing for unrecorded retirements of equipment, an auditor most likely would

Answer 6

Select items of equipment from the accounting records and then locate them during the plant tour

Question 7

Determining that proper amounts of depreciation are expensed most likely provides assurance about which management assertion about account balances related to fixed assets at the end of the period?

Answer 7

Valuation and allocation

Question 8

Which of the following procedures would an auditor most likely complete to test the existence assertion of property, plant and equipment?

Answer 8

Obtaining a listing of all current-year additions, vouching significant additions to original invoices, and determining that they have been placed in service.

Question 9

An analysis of which of the following accounts would best aid in verifying that all fixed assets have been capitalized

Answer 9

Repairs and maintenance

Question 10

When auditing prepaid insurance, an auditor discovers that the original insurance policy on plant equipment is not available for inspection.
The policy’s absence most likely indicates the possibility of a(n)

Answer 10

Lien on the plant equipment

Question 11

When using confirmations to provide evidence about the completeness assertion for accounts payable, the appropriate population most likely would be

Answer 11

Vendors with whom the entity has previously done business

Question 12

procedures would an auditor least likely perform before the balance sheet date?

Answer 12

Confirmation of accounts payable

Question 13

Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities

Answer 13

Vouch a sample of cash disbursements recorded just after year end to receiving reports and vendor invoices

Question 14

When searching for unrecorded liabilities at year end, an auditor most likely would examine

Answer 14

Cash disbursements recorded in the period subsequent to year end.

Question 15

In auditing accounts payable, an auditor’s procedures most likely would focus primarily on management’s assertion of

Answer 15

Completeness.

Question 16

Which of the following procedures would an auditor most likely perform in searching for unrecorded payables?

Answer 16

Compare cash payments occurring after the balance sheet date with the accounts payable trial balance.

Question 17

Which of the following audit procedures is best for identifying unrecorded trade accounts payable?

Answer 17

Reviewing cash disbursements recorded subsequent to the balance sheet date to determine whether the related payables apply to the prior period.

Question 18

An auditor’s program to examine long-term debt most likely would include steps that require

Answer 18

Correlating interest expense recorded for the period with outstanding debt

Question 19

In auditing long-term bonds payable, an auditor most likely would

Answer 19

Compare interest expense with the bond payable amount for reasonableness

Question 20

When control risk is assessed as low for assertions related to payroll, substantive tests of payroll balances most likely would be limited to applying analytical procedures and

Answer 20

Recalculating payroll accruals.