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Tuesday, February 1, 2011

Auditing Multiple Choice

Solution is available here for U$1.00

25. The financing cycle interfaces with the:
A) investing cycle.
B) expenditure cycle.
C) revenue cycle.
D) production cycle.
E) personnel services cycle.


26. The audit significance of the financial ratio, times interest earned, is:
A) this financial ratio provides a reasonableness test of the entity's proportion of equity that may be compared with prior years' experience or industry data.

 B) an unexpected increase or decrease in the depreciation expense as a percent of depreciable assets may indicate an error in calculating depreciation.
C) an unexpected increase in this financial ratio may indicate the failure to record or capitalize depreciable assets.
D) this financial ratio provides a test of the entity's ability to generate earnings to cover the cost of service debt.
E) this financial ratio provides a reasonableness test of shareholders' equity given the company's earnings and financing structure.


27. Analytical procedures used to audit plant assets often include calculation of :
A) return on common equity.
B) return on total assets.
C) interest bearing debt to total assets.
D) inventory turnover.
E) sustainable growth rate.


28. The specific account balance audit objective, the entity owns or has rights to all recorded plant assets at the balance sheet date, relates to the:
A) rights and obligations assertion.
B) completeness assertion.
C) existence or occurrence assertion.
D) valuation or allocation assertion.
E) presentation or disclosure assertion.


29. The specific account balance audit objective, plant asset balances include the effects of all applicable transactions for the period, relates to the:
A) rights and obligations assertion.
B) completeness assertion.
C) existence or occurrence assertion.
D) valuation or allocation assertion.
E) presentation or disclosure assertion.

30. The standard bank confirmation, developed jointly by the AICPA, the American Bankers Association, and the Bank Administration Institute, requests information about all of the following except:
A) deposit balances.
B) loan interest rates.
C) loan balances.
D) other deposit or loan accounts that may have come to the attention of the bank official
E) secondary endorsements.

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