Auditing: A Risk Based-Approach (MindTap Course List)
11th Edition
ISBN: 9781337619455
Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher: Cengage Learning
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Question
Chapter 4, Problem 12CYBK
To determine
Users of the financial statement:
The users of the financial statement can be divided into two main categories; internal users and external users. The users of the financial statement include owners, management, employee, government, creditors, lenders, etc.
To choose: The scenario that includes example of foreseen user.
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Typically, bankers require potential borrowers to provide audited financial documents with their loan application.Why is it necessary for a CPA to audit financial statements?
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Choose the one correct answer. You are the auditor of a company and you came upon the inspection of a transaction concerning its receivables. The company did not transfer all the significant risks and rewards of its certain accounts receivable to a bank and the bank agreed to give a cash advance to the company less any finance charges and not yet releasing an amount for a contingency on sales return transactions. Which of the following receivable financing most likely occurred? A. Factoring with recourseB. Discounting with recourseC. Assignment with notificationD. Discounting without recourseE. Factoring without recourse
Chapter 4 Solutions
Auditing: A Risk Based-Approach (MindTap Course List)
Ch. 4 - Prob. 1CYBKCh. 4 - Prob. 2CYBKCh. 4 - Prob. 3CYBKCh. 4 - Prob. 4CYBKCh. 4 - Prob. 5CYBKCh. 4 - Prob. 6CYBKCh. 4 - Prob. 7CYBKCh. 4 - Prob. 8CYBKCh. 4 - Prob. 9CYBKCh. 4 - Prob. 10CYBK
Ch. 4 - Prob. 11CYBKCh. 4 - Prob. 12CYBKCh. 4 - Prob. 1RQSCCh. 4 - Prob. 2RQSCCh. 4 - Prob. 3RQSCCh. 4 - Prob. 4RQSCCh. 4 - Prob. 5RQSCCh. 4 - Prob. 6RQSCCh. 4 - Refer to the Focus on Fraud feature “Moss Adams...Ch. 4 - Prob. 8RQSCCh. 4 - Prob. 9RQSCCh. 4 - Prob. 10RQSCCh. 4 - Prob. 11RQSCCh. 4 - Prob. 12RQSCCh. 4 - Prob. 13RQSCCh. 4 - Prob. 14RQSCCh. 4 - Prob. 15RQSCCh. 4 - Prob. 16RQSCCh. 4 - Prob. 17RQSCCh. 4 - Prob. 18RQSCCh. 4 - Prob. 19RQSCCh. 4 - Prob. 20RQSCCh. 4 - Prob. 21RQSCCh. 4 - Able Corporation decided to make a public offering...Ch. 4 - KPMG (LO 1, 2, 3) KPMG LLP served as the external...Ch. 4 - ToshIba, EY (LO 1, 2, 3) In 2015, the business...
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- In order to make sure that loans are properly classified, the auditor would: a. Examine due dates on duplicate copies of loan agreements to determine whether all or part are a non-current liability. b. Examine the loan agreements to determine whether the company has obligations for payment. c. Trace the totals on the loans list to the general ledger. d. Examine corporate minutes for loan approval.arrow_forwardWhat is the law that protects investors from fraudulent financial accounting activity? FASB SACS SOX CPASarrow_forwardIn the corporate world what is the common risk of an auditor encountered in terms of accounts receivable?arrow_forward
- {Auditing} 44. From the following statements, identify the statement/s that will not participate in the audit of an entity. a. Bank Reconciliation statement b. Statement of Debtors c. All the options d. Statement of Creditorsarrow_forwardDuring the audit of Albert Eistein, what relevant assertion should be used to record loans receivable net of an allowance for loan losses when allowance should adequately cover any estimated losses inherent in the loan portfolio but not excessive losses? a. Existence or occurrenceb. Valuation or allocationc. Cutoffd. Rights or obligations Among 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 Metro Bank'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?…arrow_forwardWhich of the following types of documentary evidence should the auditor consider the most reliable?a. Sales invoice created by the client with the support of proof of delivery from an outside delivery serviceb. Confirmation of debt balances sent and returned directly to the auditorc. Check made by the company and includes a sign of approval of the party receiving the money, which is included in the bank statement sent directly to the auditord. An audit list prepared by the client controller and reviewed by the client treasurer.arrow_forward
- Which 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_forwardChoose the one correct answer Which of the following statements is valid relating to confirmation of accounts receivable? * a. A positive confirmation provides more reliable evidence than the negative confirmation because the auditor can perform follow-up procedures if no response is received from the debtorB. A negative form of confirmation is preferable to use when individual account balances of customers are relatively largec. In positive confirmation, failure to reply must be regarded as a correct response, even though the debtor may have ignored the confirmation requestd. An auditor must consider using the negative form of confirmation when there is reason to believe that there may be a substantial number of accounts in dispute or with inaccuracies or irregularitiese. None of the abovearrow_forwardWhich of the following is NOT a purpose of an audit of financial statements? a.To express an opinion on the financial statements b. To detect fraud c. To provide assurance to stakeholders d.To improve the company's financial reportingarrow_forward
- Which of the following is NOT a criterion for evaluating bank liquidity used by regulators?a. availability of assets readily converted into cashb. the diversity of the bank's money market assetsc. the bank's formal and informal commitments for future lending or investmentsd. structure and volatility of deposits Choose one correct answer please.arrow_forwardWhat possible actions would an auditor might take if a client’s financial statements depart from GAAP. Would the demand for assurance services increase or decrease in the future?arrow_forwardChoose the one correct answer. Which of the following statements is invalid relating to confirmation of accounts receivable? a. A negative form of confirmation is preferable to use when individual account balances of customers are relatively smallb. A positive confirmation provides more reliable evidence than the negative confirmation because the auditor can perform follow-up procedures if no response is received from the debtorc. An auditor must consider using the negative form of confirmation when there is reason to believe that there may be a substantial number of accounts in dispute or with inaccuracies or irregularitiesd. In negative confirmation, failure to reply must be regarded as a correct response, even though the debtor may have ignored the confirmation requeste. None of the abovearrow_forward
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