An audit plan for the examination of the retained earnings account should include a step that requires verification of the Market value used to charge retained earnings to account for a two-for-one stock split. Approval of the adjustment to the beginning balance as a result of a write-down of an account receivable. Authorization for both cash and stock dividends. Gain or loss resulting from disposition of treasury shares

An audit plan for the examination of the retained earnings account should include a step that requires verification of the Market value used to charge retained earnings to account for a two-for-one stock split. Approval of the adjustment to the beginning balance as a result of a write-down of an account receivable. Authorization for both cash and stock dividends. Gain or loss resulting from disposition of treasury shares

Contemporary Auditing

11th Edition

ISBN:9781337650380

Author:KNAPP

Publisher:KNAPP

Chapter1: Comprehensive Cases

Section1.11: New Century Financial Corporation

Problem 4Q

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During an audit of an entity’s stockholders’ equity accounts, the auditor determines whether there are restrictions on retained earnings resulting from loans, agreements, or state law. This audit procedure most likely is intended to verify management’s assertion ofa. Existence or occurrence.b. Completeness.c. Valuation or allocation.d. Presentation and disclosure.
Explain the relationship between the audit of owners’ equityand the calculations of earnings per share. What are the main auditing considerations inverifying the earnings per share figure?
The auditor has a responsibility to design audit procedures to obtain sufficient and appropriate evidence. Apply two types of audit procedures that the auditor might use to support each of the following. i. Physical attendance at stock take ii. Valuation of accounts receivable iii. Balance in Bank iv. Authorised and paid-up share capital v. Accounts payable
Which of the following procedures would most likely help an auditor identify events after the date of the financial statements that should be disclosed? A.Review changes in the interest rate for cash accounts. B.Follow up on accounts receivable confirmations that were not returned for additional loss accruals. C.Inquire about changes in capital stock that was issued or repurchased. D.Evaluate depreciation schedules for additional depreciation expense.
Which of the following is the most important audit consideration when examining the stockholders’ equity section of a client’s balance sheet?a. Changes in the capital stock account are verified by an independent stock transfer agent.b. Stock dividends and stock splits during the year under audit were approved by the stockholders.c. Stock dividends are capitalized at par or stated value on the dividend declaration date.d. Entries in the capital stock account can be traced to resolutions in the minutes of meetings of the board of directors.
steps an auditor must ensure during a stock count.
Which of the following audit procedures would not likely be performed for audits of shareholders’ equity?a. Read board of directors’ minutes for authorization of equity transactions.b. Confirm outstanding common and preferred stock with stock registrar.c. Compare valuation of stock to published market prices.d. Obtain management representation about number of shares issued and outstanding.
How can the auditor determine that all dividends applicable to marketable securities owned by the client have been received and recorded?
Could the accountant be sure that all dividends due on the client's marketable securities have been received and recorded? Asap
Which of the following audit procedures would be most relevant when examiningthe completeness transaction-related audit objective for capital stock?(1) The auditor examines minutes of the board of directors’ meetings to identifyany actions involving the issuance of capital stock.(2) The auditor vouches entries in the client’s capital stock records to board minutes.(3) Confirmations of new stock issuances are sent to the client’s stock transfer agent.(4) The auditor traces entries of new stock issuances to the cash receipts journal.
For a subsequent event condition existing on or before the balance sheet date, the auditor should Group of answer choices Consider a note disclosure Report to audit committee Alert shareholders directly Adjust financial statement amounts
When auditing an investment in another company, an auditor most likely would seek to conduct which audit procedure to help satisfy the valuation assertion?a. Inspect the stock certificates evidencing the investment.b. Examine the audited financial statements of the investee company.c. Review the broker’s advice or canceled check for the investment’s acquisition.