Hw-1720 finance mcq | Business & Finance homework help

  

On the balance sheet, the cash and investment process includes

  

 
 

 
 

A. ending balance in the cash   account

 

 
 

 
 

B. interest and dividends

 

 
 

 
 

C. gains and losses on sale of   investments

 

 
 

 
 

D. trading securities

 

 
 

 
 

E. unrealized gains and losses on   investment securities classified as trading securities

 

 
 

 
 

F. both A and D

 

 
 

 
 

G. both B and C

 

 
 

 
 

H. both D and E

 
 

Question 2 

 
 

 
 

The most common misstatements that an auditor is likely to see in the cash and investment process accounts involves

  

 
 

 
 

A. misclassification of trading and   available-for-sale securities

 

 
 

 
 

B. misclassification of   held-to-maturity investments

 

 
 

 
 

C. overstatement of unrealized   gains

 

 
 

 
 

D. understatement of cash

 

 
 

 
 

E. overstatement of cash

 

 
 

 
 

F. both A and B

 

 
 

 
 

G. both C and D

 

 
 

 
 

H. both A and E

 
 

Question 3 

 
 

 
 

The client may use a variety of methods to overstate investment securities and cash. These include

  

 

 
 

A. companies may manipulate the   particular securities in the holding security account and the available for   sale account to overstate unrealized gains from trading securities and to   increase income

 

 
 

 
 

B. companies may manipulate the   particular securities in the trading security account and the available for   sale account to overstate realized gains from holding securities and to   increase income

 

 
 

 
 

C. misstating the amount of cash by   manipulating the adjustments done to the year-end bank reconciliation

 

 
 

 
 

D. companies may manipulate the   particular securities in the trading security account and the available for   sale account to overstate unrealized gains from holding securities and to   increase income

 

 
 

 
 

E. misstating the amount of cash by   manipulating the adjustments done to the year-end account reconciliation

 

 
 

 
 

F. both A and B

 

 
 

 
 

G. both C and D

 

 
 

 
 

H. both D and E

 
 

Question 4 

 
 

 
 

Management asserts that

  

 

 
 

A. the company has the right to the   assets of cash and investments

 

 
 

 
 

B. all balances related to the   investment account have been accurately recorded

 

 
 

 
 

C. all cash and investment   transactions that should be presented in the financial statements are   relevant

 

 
 

 
 

D. transactions related to the   investment process have been properly classified

 

 
 

 
 

E. the investment accounts are   reliable according to the rules of the applicable financial reporting   framework at year-end

 

 
 

 
 

F. both A and D

 

 
 

 
 

G. both B and C

 

 
 

 
 

H. both D and E

 
 

Question 5 

 
 

 
 

Although management may have designed internal controls, the auditor may choose not to test them because

  

 

 
 

A. the auditor believes it is more   efficient to use analytical procedures to gather evidence

 

 
 

 
 

B. the auditor believes it is more   effective to use substantive testing to gather evidence

 

 
 

 
 

C. the auditor believes it is more efficient to use   substantive testing to gather evidence

 

 
 

 
 

D. the auditor believes it is more   effective to use analytical procedures to gather evidence

 
 

Question 6 

 
 

 
 

IT controls that the auditor might expect to find in the cash process are

  

 
 

 
 

A. IT system restricts access to   individuals authorized to adjust cash balances

 

 
 

 
 

B. IT system restricts access to   individuals authorized to input investment purchases and investment sales

 

 
 

 
 

C. Trading and available-for-sale   investments must have a broker’s advice number to be entered into the   accounting system

 

 
 

 
 

D. Bank transfer report is   generated daily (weekly or monthly) and is reviewed by an individual one   level above the level making the transfer

 

 
 

 
 

E. Held-to-maturity investments   must have a face value, which includes the stated amount of the bond and the   discount or premium on the bond

 

 
 

 
 

F. both A and D

 

 
 

 
 

G. both B and C

 

 
 

 
 

H. both C and E

 
 

Question 7 

 
 

 
 

Key control procedures for cash are

  

 
 

 
 

A. segregation of duties

 

 
 

 
 

B. authorization procedures

 

 
 

 
 

C. documented transaction trails

 

 
 

 
 

D. physical controls

 

 
 

 
 

E. both A and B

 

 
 

 
 

F. both C and D

 
 

Question 8 

 
 

 
 

The bank confirmation is the most important procedure for the auditor because

  

 
 

 
 

A. it allows the auditor to verify   from the company that the amount of cash listed by the company is valid

 

 
 

 
 

B. it allows the auditor to inquire   from a source independent from the company that the amount of cash listed by   the company is valid

 

 
 

 
 

C. it allows the auditor to verify   from a source independent from the company that the amount of cash listed by   the company is on hand

 

 
 

 
 

D. it allows the auditor to verify from a source   independent from the company that the amount of cash listed by the company is   valid

 
 

Question 9 

 
 

 
 

Although cash is fairly easy to audit, it may also be easy to misstate cash for companies using checks to disburse cash. In this case, the correct cash amount at the end of the year is found by

  

 
 

 
 

A. taking the confirmed balances   from the banks and adjusting these amounts by subtracting the checks   outstanding and subtracting the deposits in transit

 

 
 

 
 

B. taking the confirmed balances from the banks and   adjusting these amounts by the checks outstanding and the deposits in transit

 

 
 

 
 

C. taking the confirmed balances   from management and adjusting these amounts by the checks outstanding and the   deposits in transit

 

 
 

 
 

D. taking the confirmed balances   from the banks and adjusting these amounts by adding the checks outstanding   and the deposits in transit

 
 

Question 10 

 
 

 
 

On the income statement, the long-term debt and owner’s equity process includes

  

 
 

 
 

A. interest expense accounts

 

 
 

 
 

B. gains and losses on the purchase   of investments

 

 
 

 
 

C. interest and dividends

 

 
 

 
 

D. all long-term debt and owner’s   equity accounts

 
 

Question 11 

 
 

 
 

The auditor is likely to review all transactions in the long-term debt and owner’s equity process because

  

 

 
 

A. there is usually only a few   transactions in this account

 

 
 

 
 

B. some transactions are likely to   be significant in determining the ending balance

 

 
 

 
 

C. each transaction is likely to be significant in   determining the ending balance

 

 
 

 
 

D. most transactions are likely to   be insignificant in determining the ending balance

 
 

Question 12 

 
 

 
 

The documents in the long-term debt and owner’s equity business process include

  

 
 

 
 

A. bond agreement

 

 
 

 
 

B. note receivable agreement

 

 
 

 
 

C. depreciation table for long-term   debt agreements

 

 
 

 
 

D. stock register or stock   certificate book

 

 
 

 
 

E. adjusting journal evaluation   report

 

 
 

 
 

F. both A and D

 

 
 

 
 

G. both B and C

 

 
 

 
 

H. both D and E

 
 

Question 13 

 
 

 
 

According to FASB Statement of Financial Accounting Standards No 130, Reporting Comprehensive Income, companies are required to include

  

 
 

 
 

A. a long-term debt account titled   “Accumulated Other Comprehensive Income” on the balance sheet

 

 
 

 
 

B. an owner’s equity account titled “Accumulated   Other Comprehensive Income” on the income statement

 

 
 

 
 

C. an owner’s equity account titled   “Accumulated Other Comprehensive Income” on the balance sheet

 

 
 

 
 

D. a long-term debt account titled “Accumulated   Other Comprehensive Income” on the income statement

 
 

Question 14 

 
 

 
 

The client may use a variety of methods to understate liabilities, interest expense and long-term debt. These include

  

 
 

A. Recording operating leases as   capital leases to avoid putting the liability on the balance sheet.

 

 
 

 
 

B. Designing off-balance sheet debt   agreements with the sole purpose of keeping the debt off the books of the   company.

 

 
 

 
 

C. Failing to disclose loan   covenants on long-term agreements. These loan covenants may restrict dividend   payments or limit the amount of additional debt taken on by the company.

 

 
 

 
 

D. Failing to disclose special   arrangements, such as transactions with special purpose entities.

 

 
 

 
 

E. Failing to disclose   nonrelated-party transactions.

 

 
 

 
 

F. both A and B

 

 
 

 
 

G. both B and C

 

 
 

 
 

H. both D and E

 
 

Question 15 

 
 

 
 

Which of the following are management assertions about the accounts in long-term debt and owner’s equity process?

  

 

 
 

A. existence or occurrence – for   account balances

 

 
 

 
 

B. completeness – for both classes   of transactions and account balances

 

 
 

 
 

C. valuation and allocation – for   both classes of transactions and account balances

 

 
 

 
 

D. rights and obligations – for   account balances

 

 
 

 
 

E. accuracy – for account balances

 

 
 

 
 

F. both A and C

 

 
 

 
 

G. both B and D

 

 
 

 
 

H. both D and E

 
 

Question 16 

 
 

 
 

The auditor uses substantive tests of transactions in the long-term debt and owner’s equity business process to

  

 
 

 
 

A. test the reliability of   transactions during the year

 

 
 

 
 

B. test the reliability of balances   at the end of the year

 

 
 

 
 

C. test the recording of balances   at the end of the year

 

 
 

 
 

D. test the recording of transactions during the year

 
 

Question 17 

 
 

 
 

The key substantive tests of balances for the long-term debt and owner’s equity process include

  

 
 

A. obtain a listing of the ending   balance of notes payable, long-term debt, and lines of credit

 

 
 

 
 

B. obtain a listing of ending   balance in the capital stock accounts

 

 
 

 
 

C. obtain a schedule showing the   beginning balance in the retained earnings account and the accumulated other comprehensive   income

 

 
 

 
 

D. obtain a listing of the recent   payments of notes payable, long-term debt, and lines of credit

 

 
 

 
 

E. obtain a schedule showing the   transactions in the retained earnings account and the accumulated other   comprehensive income

 

 
 

 
 

F. both A and B

 

 
 

 
 

G. both C and E

 

 
 

 
 

H. both D and E

 
 

Question 18 

 
 

The disclosures in the long-term debt and owner’s equity process related to the financial statements are usually found in

  

 
 

 
 

A. the auditor’s work papers

 

 
 

 
 

B. the footnotes to the financial   statements

 

 
 

 
 

C. a separate report attached to   the financial statements

 

 
 

 
 

D. in the “Management’s   Discussion and Analysis” section of the annual report

 

 
 

 
 

E. in the internal control report

 

 
 

 
 

F. both A and B

 

 
 

 
 

G. both B and D

 

 
 

 
 

H. both C and E