SOLVED

11) Which of the following balance-related audit objectives is not applicable to the audit of notes payable? A) Realizable value B) Detail tie-in C) Cutoff D) Classification 12) When there are not numerous transactions involving notes payable during the year, the normal starting point for the audit of notes payable is: A) a schedule of notes payable and accrued interest prepared by the audit team. B) a schedule of notes payable and accrued interest obtained from the client. C) a schedule of only those notes with unpaid balances at the end of the year prepared by the client. D) the notes payable account in the general ledger. 13) The tests of details of balances procedure which requires the auditor to examine notes paid after year-end to determine whether they were liabilities at the balance sheet date is an attempt to satisfy the audit objective of: A) existence. B) completeness. C) accuracy. D) classification. 14) The audit objective that requires that existing notes payable be included in the notes payable schedule is satisfied by performing which of the following audit procedures? A) confirm notes payable B) trace the total of the notes payable schedule to the general ledger C) review the notes payable schedule to determine whether any are related parties D) obtain confirmations from creditors who have held notes from the client in the past and are not currently included in the notes payable schedule 15) The audit objective that requires the auditor to determine that notes payable on the notes payable schedule are properly classified can be tested by performing the procedure to: A) confirm notes payable. B) examine corporate minutes for loan approval. C) examine notes, minutes, and bank confirmations for restrictions. D) review the notes to determine whether any are with related parties. 16) During the course of an audit, a CPA observes that the recorded interest expense seems to be excessive in relation to the balance in the long-term debt account. This observation could lead the auditor to suspect that: A) long-term debt is understated. B) discount on bonds payable is overstated. C) long-term debt is overstated. D) premium on bonds payable is understated. 17) A company issued long-term notes payable for cash during the year under audit. To ascertain that this transaction was properly recorded, the auditor’s best course of action is to: A) trace the cash received from the issuance to the accounting records. B) confirm the results of the issuance with the underwriter or investment banker. C) verify that the new cash received is credited to an account entitled “Bonds Payable.” D) request a statement from the bond trustee as to the amount of bonds issued and outstanding. 18) In the audit of notes payable, it is common to include tests of principal and interest payments as a part of the audit of the acquisitions and payment cycle because the payments are in the cash disbursements journal that is being sampled. It is also normal to test these transactions as part of the capital acquisitions and repayment cycle because: A) it is not unusual for the auditor to duplicate a process, thereby gathering a larger quantity of evidence. B) replicating the evidence will provide the auditor with a higher level of assurance. C) the tests done in the acquisitions and payments cycle will look only at the cash credit side so the tests done in the capital acquisitions and repayment cycle will look at the debit side of the transaction. D) due to the infrequency of these transactions, in many cases no transactions involving notes payable are included in the sample tests of acquisitions and payments. 19) Which of the following is not an important control over notes payable? A) proper authorization over the issuance of new notes payable B) notes payable are issued when the business climate is favorable C) adequate controls exist over repayment of interest and principal D) there exists proper documents and records 20) The audit procedure “examine duplicate copies of notes payable to determine whether the notes payable were dated on or before the balance sheet date” is done for which of the following balance-related audit objective? A) completeness B) cut-off C) detail tie-in D) existence 21) The two most important balance related objectives in notes payable are: A) completeness and accuracy B) existence and completeness C) accuracy and classification D) existence and occurrence