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1.

value:

10.00 points
The control objectives for notes and loans payable include:
Authorization, accuracy, completeness and validity.
Authorization only.
Only authorization and accuracy.
Only authorization and existence.
References
Multiple ChoiceLearning Objective: 14-02 Outline control tests for auditing control over debt,
owner's equity, and investment transactions.

2.
value:

10.00 points
Transactions in debt and shareholders equity capital are
Are typically large in number and insignificant in monetary value.
Very infrequent in nature and deserve little attention from senior management.
Are typically few in number but large in monetary amount and handled by the highest levels of
management.
Are not audited very closely by external auditors.
References
Multiple ChoiceLearning Objective: 14-01 Describe the finance and investment process: risk
assessment, typical transactions, source documents, controls, and account balances.

3.
value:

10.00 points
An audit program for the examination of the retained earnings account should include a step that
requires verification of which of the following:
Approval of the adjustment to the beginning balance as a result of a write-down of account
receivables.
Market value used to charge retained earnings to account for a two-for-one share split.
Authorization for both cash and share dividends.
Gain or loss resulting from disposition of available-for-sale financial assets.
References
Multiple ChoiceLearning Objective: 14-03 Describe the typical substantive procedures used to
respond to the assessed risk of material misstatement in the main account balance, and in
transactions in the finance and investment process.

4.
value:

10.00 points
A corporate balance sheet indicates that one of the corporate assets is a patent. Where will an
auditor most likely be able to obtain a written
representation of this patent from?
Patent owner.
Regional patent office.
Patent inventor.
Patent lawyer.
References
Multiple ChoiceLearning Objective: 14-03 Describe the typical substantive procedures used to
respond to the assessed risk of material misstatement in the main account balance, and in
transactions in the finance and investment process.

5.
value:

10.00 points
Which of the following is the most important consideration of an auditor when examining the
shareholders equity section of a clients balance
sheet?
Changes in the share capital account are verified by an independent share transfer agent.
Stock dividends and stock splits during the year were approved by the shareholders.
Stock dividends are capitalized at par or stated value on the dividend declaration date.
Entries in the share capital account can be traced to resolutions in the minutes of the board of
directors meetings.
References
Multiple ChoiceLearning Objective: 14-03 Describe the typical substantive procedures used to
respond to the assessed risk of material misstatement in the main account balance, and in
transactions in the finance and investment process.

6.
value:

10.00 points
When a large amount of negotiable securities is held by the client, planning by the auditor is
necessary to guard against which of the following?
Substitution of authentic securities with counterfeit securities.
Unauthorized negotiation of the securities before they are counted.
Unrecorded sales of securities after they are counted.
Substitution of securities already counted for other securities which should be on hand but are not.
References
Multiple ChoiceLearning Objective: 14-04 Describe the most common fraud problems in the finance
and investment process.

7.
value:

10.00 points
If there are enough red flags present to indicate an increased risk of misstatement, the auditors will
assess a higher inherent risk. This
assessment would result in
Less evidence being obtained.
Performing fewer audit procedures.
Expanding the extent of the audit procedures.
Applying more audit procedures at the interim audit date.
References
Multiple ChoiceLearning Objective: 14-04 Describe the most common fraud problems in the finance
and investment process.

8.
value:

10.00 points
A control test for note and loans payable would include selecting a sample of notes paid and
recalculating the interest expense for the period
under audit. This would test which control objective?
Accuracy.
Validity.
Authorization.
Completeness.
References
Multiple ChoiceLearning Objective: 14-02 Outline control tests for auditing control over debt,
owner's equity, and investment transactions.

9.
value:

10.00 points
Which of the following is not accurate when discussing the finance and investment process?
Directors should approve all share capital transactions.
Typically, finance and investment transactions are audited in detail.
Derivative instruments are usually complex transactions.
Segregation of duties is extremely important.
References
Multiple ChoiceLearning Objective: 14-02 Outline control tests for auditing control over debt,
owner's equity, and investment transactions.

10.
value:

10.00 points
Who is more likely to be involved in fraud related to investments and intangibles?
Middle management.
Payroll clerks.
Senior officials.
Accounting clerks.
References
Multiple ChoiceLearning Objective: 14-04 Describe the most common fraud problems in the finance
and investment process.

11.
value:

10.00 points
Financial planning starts with:
The chief financial officer's cash flow forecast.
A directive from the board of directors.
External consultants who will help plan the strategy of the company.
The president or chief executive office.
References
Multiple ChoiceLearning Objective: 14-01 Describe the finance and investment process: risk
assessment, typical transactions, source documents, controls, and account balances.

12.
value:

10.00 points
The key to control for the finance and investment process is
Trustworthy employees.
Good corporate governance.
Having an experienced accountant.
Good computer software accounting programs.
References
Multiple ChoiceLearning Objective: 14-01 Describe the finance and investment process: risk
assessment, typical transactions, source documents, controls, and account balances.

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