26586102
Description
Quiz by Kayla Harbaugh, updated more than 1 year ago
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Created by Kayla Harbaugh
about 4 years ago
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Question 1
Question
Which of the following accounts would not typically be included in the audit of debt?
Answer
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a. Interest expense.
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b. Bonds payable.
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c. Notes payable.
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d. Interest income.
Question 2
Question
Which of the following most accurately describes the nature of fraud related to equity described in the case of Delphi Corporation presented in the Focus on Fraud feature?
Answer
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a. Stock options were backdated.
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b. Proceeds from stock sales were misappropriated.
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c. Expenses were charged directly to retained earnings, rather than to the appropriate expense accounts.
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d. Stock sales were not authorized.
Question 3
Question
Which of the following would an auditor typically not perform as part of gaining an understanding of the client's controls related to debt?
Answer
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a. Inquire of management about the process for reviewing compliance with debt covenants.
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b. Recalculate interest expense.
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c. Review policies related to approval required for new debt.
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d. Review the client's documentation of controls.
Question 4
Question
How does an auditor typically respond to identified risks of material misstatement associated with debt?
Answer
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a. The auditor will typically plan an approach that uses only substantive procedures.
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b. The auditor will typically plan to perform a controls reliance approach to the audit.
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c. Because of the low level of risk of material misstatement, the auditor would only rely on planning analytical procedures.
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d. The auditor does not need to respond to identified fraud risks since the risk of fraud related to debt is typically minimal.
Question 5
Question
Which of the following would the auditor not try to determine about a client's warranty estimate?
Answer
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a. Whether the estimate is reasonable in the circumstance.
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b. How management developed the estimate.
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c. Whether management based the estimate on verifiable, objective assumptions.
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d. Whether the factors and assumptions used by management deviate from historical patterns.
Question 6
Question
Typically, the most relevant assertion related to debt is completeness.
Answer
- True
- False
Question 7
Question
A potential fraud risk associated with debt is the intentional misclassification of short-term debt as long-term debt.
Answer
- True
- False
Question 8
Question
An auditor would typically not use trend analyses as a planning analytical procedure when auditing debt.
Answer
- True
- False
Question 9
Question
When testing debt, the auditor typically uses a substantive audit approach.
Answer
- True
- False
Question 10
Question
Auditors can test the client's warranty reserves using primarily tests of controls and substantive analytical procedures.
Answer
- True
- False
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