Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 22, Problem 17.1MCQ
To determine
Indicate the control for the completeness assertion for notes payable that will justify a reduced assessed level of control risk.
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Which of the following controls will most likely justify a reduced assessed level ofcontrol risk for the completeness assertion for notes payable?(1) The accounting staff reviews board of director minutes for any indication ofany transactions involving outstanding debt to make sure all borrowings areincluded in the general ledger.(2) All borrowings that exceed $500,000 require approval from the board ofdirectors before loan contracts can be finalized.(3) Before approving disbursement of principal payments on notes payable, thetreasurer reviews terms in the note.(4) Accounting maintains a detailed schedule of outstanding note payable that isreconciled monthly to the general ledger.
When auditing contingent liabilities, which of the following procedures would be MOST effective?
a.
Reviewing the allowance for doubtful accounts.
b.
Reviewing the bank cutoff statement.
c.
Examining customer confirmation replies.
d.
Examining invoices for repairs expense.
e.
Abstracting the minutes of the board of directors.
4. Prepare reports and file documentation as required through completion of the following actions:
a. Prepare reports that document the accounts receivable, debt recovery type and cause, and debt recovery plan, and
distribute these to the supervisors, managers, and other designated parties
b. File the documentation and reports according to organisational policy and procedures. Document or provide the
policy/procedures used for file storage. Create an Aged Receivables Detail report that aligns with the bad debts ageing as
per your Collections Policy and submit it with this assessment
Chapter 22 Solutions
Auditing And Assurance Services
Ch. 22 - List four examples of interest-bearing liability...Ch. 22 - Prob. 2RQCh. 22 - Prob. 3RQCh. 22 - Prob. 4RQCh. 22 - Prob. 5RQCh. 22 - Distinguish between (a) tests of controls and...Ch. 22 - Prob. 7RQCh. 22 - Prob. 8RQCh. 22 - Prob. 9RQCh. 22 - Prob. 10RQ
Ch. 22 - Prob. 11RQCh. 22 - Prob. 12RQCh. 22 - Prob. 13RQCh. 22 - Prob. 14RQCh. 22 - Prob. 15RQCh. 22 - Explain the relationship between the audit of...Ch. 22 - Prob. 17.1MCQCh. 22 - Prob. 17.2MCQCh. 22 - Prob. 17.3MCQCh. 22 - Prob. 18.1MCQCh. 22 - Prob. 18.2MCQCh. 22 - Prob. 18.3MCQCh. 22 - Prob. 19.1MCQCh. 22 - Prob. 19.2MCQCh. 22 - Prob. 19.3MCQCh. 22 - Prob. 20DQPCh. 22 - Prob. 21DQPCh. 22 - Prob. 22DQPCh. 22 - Prob. 23DQPCh. 22 - Prob. 24DQPCh. 22 - Prob. 25DQPCh. 22 - Prob. 26DQPCh. 22 - Prob. 27DQPCh. 22 - Prob. 28DQPCh. 22 - Prob. 29DQPCh. 22 - Prob. 30DQP
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- Items 1 through 6 are questions typically found in a standardinternal control questionnaire used by auditors to obtain an understanding of internalcontrol for notes payable. In using the questionnaire for a client, a “yes” response indicatesa possible internal control, whereas a “no” indicates a potential deficiency.1. Are liabilities for notes payable incurred only after written authorization by a propercompany official?2. Are paid notes cancelled and retained in the company files?3. Is a notes payable master file maintained?4. Is a periodic reconciliation made of the notes payable master file with the actualnotes outstanding by an individual who does not maintain the master file?5. Is the individual who maintains the notes payable master file someone other thanthe person who approves the issue of new notes or handles cash?6. Are interest expense and accrued interest recomputed periodically by an individualwho does not record interest transactions?a. For each of the preceding…arrow_forwardWhich of the following questions would auditors most likely include on an internal control questionnaire for notes payable?a. Are assets that collateralize notes payable critically needed for the entity’s continued existence?b. Are two or more authorized signatures required on checks that repay notes payable?c. Are the proceeds from notes payable used to purchase noncurrent assets?d. Are direct borrowings on notes payable authorized by the board of directors?arrow_forward3. In the audit of loans payable, which of the following audit procedure would be most likely performed to validate the existence assertion? Group of answer choices a. Review loan contracts b. Sending loan confirmations c. Vouching of subsequent payments of loans d. Performing analytical procedures 4. You are auditing the December 31, 2021, accounts payable balance of one of your firm’s divisions. The division controller’s office has provided you with a schedule listing the creditors and the amount owed to each at December 31, 2021. Which of the following audit procedures would be your best choice for determining that no individual account payable has been omitted from the schedule? Group of answer choices a. Send confirmation requests to a randomly selected sample of creditors listed on the schedule b. Examine support for selected 2022 payments to creditors, ascertaining that those relating to 2022 are not on the schedule. c. Send confirmation requests to creditors that…arrow_forward
- Which of the following control objectives would be least likely be considered by the internal auditors in drafting the audit procedures for bank accounts and banking arrangement activities under the Acquire-to-Retire process? Group of answer choices To ensure that fund transfers and automated methods of effecting banking transactions are valid and verified, in the best interests of the organization, and authorized. To ensure that all banking transactions are bona fide, accurate and authorized whenever necessary. To ensure that all income from bank is recorded without delay. To ensure that banking charges are effectively monitored and minimized. To ensure that the potential for staff malpractice and fraud are minimized. To ensure that banking arrangements and facilities are sufficient, appropriate and adequate for the business. To ensure that overdraft set facilities are authorized and correctly operated within the limits defined by management and the organization's…arrow_forward2. Which of the following control objectives would be least likely be considered by the internal auditors in drafting the audit procedures for bank accounts and banking arrangement activities under the Acquire-to-Retire process? Group of answer choices To ensure that fund transfers and automated methods of effecting banking transactions are valid and verified, in the best interests of the organization, and authorized. To ensure that banking arrangements and facilities are sufficient, appropriate and adequate for the business. To ensure that the potential for staff malpractice and fraud are minimized. To ensure that all banking transactions are bona fide, accurate and authorized whenever necessary. To ensure that all income from bank is recorded without delay. To ensure that overdraft set facilities are authorized and correctly operated within the limits defined by management and the organization's bankers. To ensure that banking charges are effectively monitored and…arrow_forwardAmong the prescribed audit activities provided below, which of the following would effectively help Metro bank determine its proper allowance for loan losses?a. Make visits to the borrower's commercial business site periodically.b. Have procedures in place to identify problem loans in a timely fashion.c. Identify any weaknesses in the institution's lending process.d. Obtain additional collateral for a loan. When assessing the reasonableness of PNB's allowance for loan losses as a whole, you discovered that his estimate differs from the recorded allowance and that the difference is immaterial. How should you address this finding in your audit?a. Reconsider the precision of his estimateb. Record it on the summary of audit differences.c. Propose an adjustment.arrow_forward
- The auditor must mail cash confirmations, but the client may mail long-term debt confirmations. Question 44 options: True Falsearrow_forwardWhich of the following procedures would a CPA most likely perform in planning a financial statement audit?a. Make inquiries of the client’s lawyer concerning pending litigation.b. Perform cutoff tests of cash receipts and disbursements.c. Compare financial information with nonfinancial operating data.d. Recalculate the prior-years’ accruals and deferrals.arrow_forward
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