ACC 492 Week 3 Individual Multiple Choice Quiz
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1 Which of the following approaches is most suitable for auditing the finance and investment cycle?
a. Perform extensive tests of controls and limit substantive procedures to analytical procedures.
b. Ignore internal controls and perform extensive substantive procedures.
c. Review internal controls, and perform extensive substantive procedures.
d. Ignore internal controls and limit substantive procedures to analytical procedures.
2. Loan covenants are used for which of the following reasons?
a. To protect the lender from the borrower substantially weakening the borrower’s financial position.
b. To protect the borrower from the lender calling the loan early.
c. To protect the auditor from false information by the borrower.
d. To protect shareholders from management taking on too much debt.
3. A related-party is a person or entity that
a. Has a family tie to a management member.
b. Does business with the company.
c. Can exert significant influence over or be influenced by the company.
d. Is a member of the company’s management.
4. Jones was engaged to examine the financial statements of Gamma Corporation for the year ended June 30. Having completed an examination of the investment securities, which of the following is the best method of verifying the accuracy of recorded dividend income?
a. Tracing recorded dividend income to cash receipts records and validated deposit slips.
b. Utilizing analytical procedures and statistical sampling.
c. Comparing recorded dividends with amounts appearing on federal information Form 1099.
d. Comparing recorded dividends with a standard financial reporting service’s record of dividends.
5. When the client holds a large amount of negotiable securities, auditors need to plan to guard against
a. Unauthorized negotiation of the...