Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 1, Problem 26QRA
A corporation is contemplating issuing debenture bonds to a group of investors.
Required:
- a. Explain how independent audits of the corporation’s financial statements facilitate this transaction.
- b. Describe the likely effects on the transaction if the corporation decides not to obtain independent audits of its financial statements.
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Students have asked these similar questions
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.
The company holds bonds. The responsibility of the collection of interest andprincipal should be delegated to:
choices:
The internal auditorCashierTreasurerAccounting supervisor
Following are typical questions that might appear on an internal control questionnaire for investments in marketable securities.
Is custody of investment securities maintained by an employee who does not maintain the detailed records of the securities?
Are securities registered in the company name?
Are investment activities reviewed by an investment committee of the board of directors?
Describe the manner in which each of the above procedures might be tested.
Chapter 1 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 1 - Prob. 1RQCh. 1 - Prob. 2RQCh. 1 - Prob. 3RQCh. 1 - Prob. 4RQCh. 1 - Prob. 5RQCh. 1 - Prob. 6RQCh. 1 - Prob. 7RQCh. 1 - Prob. 8RQCh. 1 - Prob. 9RQCh. 1 - Prob. 10RQ
Ch. 1 - Prob. 11RQCh. 1 - Prob. 12RQCh. 1 - Describe briefly the function of the GAO.Ch. 1 - Prob. 14RQCh. 1 - Prob. 15RQCh. 1 - Prob. 16RQCh. 1 - Prob. 17RQCh. 1 - Prob. 18RQCh. 1 - Prob. 19RQCh. 1 - Prob. 20RQCh. 1 - Prob. 21RQCh. 1 - Prob. 22RQCh. 1 - What characteristics make an accounting...Ch. 1 - Prob. 24RQCh. 1 - Prob. 25QRACh. 1 - A corporation is contemplating issuing debenture...Ch. 1 - Prob. 27QRACh. 1 - Prob. 28QRACh. 1 - Prob. 29AOQCh. 1 - Prob. 29BOQCh. 1 - Prob. 29COQCh. 1 - Prob. 29DOQCh. 1 - Prob. 29EOQCh. 1 - Prob. 29FOQCh. 1 - Prob. 29GOQCh. 1 - Which of the following did not precipitate the...Ch. 1 - Prob. 29IOQCh. 1 - Prob. 29JOQCh. 1 - Prob. 29KOQCh. 1 - Prob. 29LOQCh. 1 - Prob. 30OQCh. 1 - Prob. 31OQCh. 1 - Prob. 32OQCh. 1 - Prob. 33OQCh. 1 - Prob. 34OQCh. 1 - Prob. 35OQCh. 1 - Prob. 36OQCh. 1 - Prob. 37PCh. 1 - Prob. 38PCh. 1 - Will Williams, a college senior, has begun the...Ch. 1 - Smith Co., a local Dallas public accounting firm,...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Assume that a corporation needs to enter the private debt market to raise funds for plant expansion. The corporation expects debt covenants to place restrictions on the levels of its current ratio and total-liabilities-to-assets ratio. Considering the accounts that comprise these ratios, give examples of accounting estimates, accounting judgments, and structured transactions that the lender should examine closely.arrow_forwardWhich of the following is not one of the five primary responsibilities of the Securities and Exchange Commission (the SEC)? A. inform and protect investors B. regulate securities law C. facilitate capital formation D. assure that dividends are paid by corporationsarrow_forwardAuditing Debt and EquityThe following is attached to the company's financial statements, pay attention to the noncurrent liabilities and shareholders’ equity sections. Questions:a. Based on the financial statements above, explain possible “debt to equity swap” scheme carried out by the client!b. What evidence do you need to collect to ensure that the client's debt to equity swap is free from material misstatement?arrow_forward
- In connection with the audit of an issue of long-term bonds payable, the audit team shoulda. Determine whether bondholders are persons other than owners, directors, or officers of the company issuing the bond.b. Calculate the effective interest rate to see whether it is substantially the same as the rates charged for similar issues.c. Decide whether the bond issue was made without violating state or local laws or regulations.d. Ascertain that the client has obtained the opinion of counsel on the legality of the issue.arrow_forwardWhich of the following statements regarding auditors’ liability under the Securities Act of1933 is not true?a. The act relates to the initial issuance of securities to the public, normally through an initial public offering.b. Auditors’ liability arises because of audited financial information filed with the SEC.c. Third parties must demonstrate that they relied on misstated financial statements thatwere examined by auditors.d. Auditors may be liable if they are found to have engaged in ordinary negligence.arrow_forwardFollowing are typical questions that might appear on an internal control questionnaire for investments in marketable securities. Is custody of investment securities maintained by an employee who does not maintain the detailed records of the securities? Are securities registered in the company name? Are investment activities reviewed by an investment committee of the board of directors? Describe the purpose of each of the above controls.arrow_forward
- Auditing Debt and Equity The following is attached to the company's financial statements, pay attention to the non current liabilities and shareholders’ equity sections. Questions:a. Based on the financial statements above, explain possible “debt to equity swap” scheme carried out by the client! b. What evidence do you need to collect to ensure that the client's debt to equity swap is free from material misstatement?arrow_forward18. Application for a bank loan and Issuance of securities by a corporation are part of situations as a common required in report by an independent public accountant concerning the fairness of a company's financial statementsSelect one:TrueFalsearrow_forwardIn performing risk assessment procedures for investments, an auditor may inquire of the client personnel which of the following questions? a. Are investment securities acquisitions and disposals properly authorized by the board of directors? b. Is access to investment securities restricted to at least two authorized officials? c. All of the choices. d. Are the duties of authorization, custody, recording keeping and valuation of investment securities transactions segregated?arrow_forward
- Which of the following is correct regarding the classification of investment in debt instruments as financial asset at fair value through OCI? This classification is not allowed for investment in debt instruments. In order to be classified as such, a debt instrument needs to both have simple principal and interest cash flows and be held in a business model in which both holding and selling financial assets are integral to meeting management's objectives. An entity may make an irrevocable election to classify investment in a debt instrument that is not held for trading as such. All of these.arrow_forwardHow does the audit of owners’ equity for a closely held corporationdiffer from that for a publicly held corporation? In what respects are there no significantdifferences?arrow_forwardEntities desiring to issue equity or debt must provide a set of financial statements to any prospective purchaser. This set of financial statements and other information for prospective purchasers is known as aa. Prospectus.b. Review.c. Patron’s acquisition statement.d. Projected audited financial information.arrow_forward
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