AUDITING LL W/ CONNECT <C>
11th Edition
ISBN: 9781307416268
Author: MESSIER
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 15, Problem 15.17MCQ
To determine
Concept Introduction:
Every company who issue shares in the market is called public company. Every company has to prepare minutes of every activity of company. When the company holds any meeting, then also prepare minutes of activities of meeting. At every meeting of members and directors, minutes are prepared.
To choose: The correct statement concerning the authorisation assertion regarding stock issuance and
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The following audit procedures are commonly performed by auditors in the verification of owners’ equity:
1.Review articles of incorporation and bylaws for provisions about owners’ equity.
2.Analyze all owners’ equity accounts for the year and document the nature of any recorded change in each account.
3.Confirm capital stock transactions with the stock registrar and transfer agent.
4.Confirm shares issued and outstanding with the stock registrar and transfer agent.
5.Review the minutes of the board of directors’ meetings for the year for approvals related to owners’ equity.
6.Recompute earnings per share.
7.Review debt provisions and senior securities with respect to liquidation preferences, dividends in arrears, and restrictions on the payment of dividends or the issue of stock.
Required
State the purpose of each of these seven audit procedures.
List the type of misstatements the auditors can uncover by the use of each audit procedure.
Which of the following audit procedures would be most relevant when examiningthe completeness transaction-related audit objective for capital stock?(1) The auditor examines minutes of the board of directors’ meetings to identifyany actions involving the issuance of capital stock.(2) The auditor vouches entries in the client’s capital stock records to board minutes.(3) Confirmations of new stock issuances are sent to the client’s stock transfer agent.(4) The auditor traces entries of new stock issuances to the cash receipts journal.
The auditor has a responsibility to design audit procedures to obtain sufficient and appropriate evidence. Apply two types of audit procedures that the auditor might use to support each of the following.
i. Physical attendance at stock take
ii. Valuation of accounts receivable
iii. Balance in Bank
iv. Authorised and paid-up share capital
v. Accounts payable
Chapter 15 Solutions
AUDITING LL W/ CONNECT <C>
Ch. 15 - Prob. 15.1RQCh. 15 - Prob. 15.2RQCh. 15 - Prob. 15.3RQCh. 15 - Prob. 15.4RQCh. 15 - Prob. 15.5RQCh. 15 - Prob. 15.6RQCh. 15 - Prob. 15.7RQCh. 15 - Prob. 15.8RQCh. 15 - Prob. 15.9RQCh. 15 - Prob. 15.10RQ
Ch. 15 - Prob. 15.11MCQCh. 15 - Prob. 15.12MCQCh. 15 - Prob. 15.13MCQCh. 15 - Prob. 15.14MCQCh. 15 - Prob. 15.15MCQCh. 15 - Prob. 15.16MCQCh. 15 - Prob. 15.17MCQCh. 15 - Prob. 15.18MCQCh. 15 - Prob. 15.19MCQCh. 15 - Prob. 15.20MCQCh. 15 - Prob. 15.21PCh. 15 - Prob. 15.22PCh. 15 - Prob. 15.23PCh. 15 - Prob. 15.24P
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- During an audit of an entity’s stockholders’ equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management’s assertion ofa. Existence or occurrence.b. Completeness.c. Valuation or allocation.d. Presentation and disclosure.arrow_forwardThe following audit procedures are commonly performedby auditors in the verification of owners’ equity:1. Review the articles of incorporation and bylaws for provisions about owners’ equity.2. Analyze all owners’ equity accounts for the year and document the nature of anyrecorded change in each account.3. Account for all certificate numbers in the capital stock book for all shares outstanding.4. Examine the stock certificate book for any stock that was cancelled.5. Review the minutes of the board of directors’ meetings for the year for approvalsrelated to owners’ equity.6. Recompute earnings per share.7. Review debt provisions and senior securities with respect to liquidation preferences,dividends in arrears, and restrictions on the payment of dividends or the issue of stock.a. State the purpose of each of these seven audit procedures.b. List the type of misstatements the auditors can uncover by the use of each auditprocedure.arrow_forwardWhich of the following audit procedures would not likely be performed for audits of shareholders’ equity?a. Read board of directors’ minutes for authorization of equity transactions.b. Confirm outstanding common and preferred stock with stock registrar.c. Compare valuation of stock to published market prices.d. Obtain management representation about number of shares issued and outstanding.arrow_forward
- please explain your choicearrow_forwardWhat is the purpose of an audit of a company's financial statements? Provide references if any.arrow_forwardIn establishing the existence and ownership of an investment held by a corporationin the form of publicly traded stock, an auditor should inspect the securities or(1) obtain written representations from management confirming that the securitiesare properly classified as trading securities.(2) inspect the audited financial statements of the investee company.(3) confirm the number of shares owned that are held by an independent custodian.(4) determine that the investment is carried at the lower of cost or market.arrow_forward
- Users of audited financial statements include: Management Stockholders Bond holders All of the abovearrow_forwardThe annual financial statements of all large, publicly owned corporations are audited.a. What is an audit of financial statements?b. Who performs audits?c. What is the purpose of an audit?arrow_forwardAn audit plan for the examination of the retained earnings account should include a step that requires verification of the Market value used to charge retained earnings to account for a two-for-one stock split. Approval of the adjustment to the beginning balance as a result of a write-down of an account receivable. Authorization for both cash and stock dividends. Gain or loss resulting from disposition of treasury sharesarrow_forward
- Need all parts solution, DON'T USE AI.arrow_forwardAn auditor working with a publicly traded client learns that the client has been completing stock trades based on insider information. how should the auditor fulfill the legal obligations?arrow_forwardBelow ais the summary of the SEC listing requirements for the audit committee responsibilities of companies listed on the stock exchange. For each requirement, state how it is intended to help to address the risk of fraud on publicly listed traded organizationsarrow_forward
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