AUDITING RMU
11th Edition
ISBN: 9781260934830
Author: MESSIER
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 16, Problem 16.20MCQ
To determine
Introduction:
Long Term Investments are assets that entities/organizations intend to hold for a period of more than 1 year at least and has purpose of gaining through regular/periodic income on such investments and has no intention of selling it any time soon.
A Public traded company means a company whose value or ownership is recognized through shares of stock held in stock market and are traded in and over counter.
To select: The correct option.
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In 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.
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.
An 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 shares
Chapter 16 Solutions
AUDITING RMU
Ch. 16 - Prob. 16.1RQCh. 16 - Prob. 16.2RQCh. 16 - Prob. 16.3RQCh. 16 - Prob. 16.4RQCh. 16 - Prob. 16.5RQCh. 16 - Prob. 16.6RQCh. 16 - Prob. 16.7RQCh. 16 - Prob. 16.8RQCh. 16 - Prob. 16.9RQCh. 16 - Prob. 16.10RQ
Ch. 16 - Prob. 16.11RQCh. 16 - Prob. 16.12MCQCh. 16 - Prob. 16.13MCQCh. 16 - Prob. 16.14MCQCh. 16 - Prob. 16.15MCQCh. 16 - Prob. 16.16MCQCh. 16 - Prob. 16.17MCQCh. 16 - Prob. 16.18MCQCh. 16 - Prob. 16.19MCQCh. 16 - Prob. 16.20MCQCh. 16 - Prob. 16.21MCQCh. 16 - Prob. 16.22MCQCh. 16 - Prob. 16.23MCQCh. 16 - Prob. 16.24PCh. 16 - Prob. 16.25PCh. 16 - Prob. 16.26PCh. 16 - Prob. 16.27PCh. 16 - Prob. 16.28PCh. 16 - Prob. 16.29PCh. 16 - Prob. 16.30P
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- please explain your choicearrow_forwardIn testing the valuation of the company's quoted investments in stocks measured at fair value, the auditor would most likely perform the following: Group of answer choices a.Obtain the market price of the investments in stocks b.Obtain representation from the management's expert. c.Send confirmation letter's to the company's trading agent. d.Engage the auditor's expert. You were assigned to audit the bond investments of JIHUZ company. The company maintains the records and custody of its certificates, thus you have decided to conduct a count of securities to test the existence assertion. You have asked that a person from JIHUZ company should accompany you during the count. Why is this important? a.To detect fraudulent securities b.So that the company representative may assist you during the count c.To acknowledge any variances during the inspection. d.So that the inspection of securities will be conducted in an efficient manner. The treasury department…arrow_forwardDuring 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_forward
- Which 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_forwardAn audit plan for the examination of the retained earnings account should include a step that requires verification of the (choose two steps)a. Market value used to charge retained earnings to account for a 2-for-1 stock split.b. Approval of the adjustment to the beginning balance as a result of a write-down of account receivables.c. Authorization for both cash and stock dividends declared and paid.d. Gain or loss resulting from disposition of treasury shares.arrow_forwardWhich of the following is the most important audit consideration when examining the stockholders’ equity section of a client’s balance sheet?a. Changes in the capital stock account are verified by an independent stock transfer agent.b. Stock dividends and stock splits during the year under audit were approved by the stockholders.c. Stock dividends are capitalized at par or stated value on the dividend declaration date.d. Entries in the capital stock account can be traced to resolutions in the minutes of meetings of the board of directors.arrow_forward
- In testing the valuation of the company's quoted investments in stocks measured at fair value, the auditor would most likely perform the following: a. Obtain the market price of the investments in stocks b. Obtain representation from the management's expert. c. Send confirmation letter's to the company's trading agent. d. Engage the auditor's expert.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_forwardHow can the auditor determine that all dividends applicable to marketable securities owned by the client have been received and recorded?arrow_forward
- The auditors join client stock take at the year end and see whether the way that they count is in the correct procedures or not. This procedure is an example of: * Observation Inquiry Inspection of tangible assets O Inspection of records and documentsarrow_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 report any violations of the law?arrow_forwardIn performing risk assessment procedures for investments, an auditor may inquire of the client personnel which of the following questions? a. Are investment securities acquisitions and disposals properly authorized by the board of directors? b. Is access to investment securities restricted to at least two authorized officials? c. All of the choices. d. Are the duties of authorization, custody, recording keeping and valuation of investment securities transactions segregated?arrow_forward
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