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Which of the following statements is generally correct about the appropriateness of audit evidence?
Tugboats Corporation, a calendar year corporation that began doing business on January 1, 2005, had $35,000 in accumulated earnings and profits on January 1, 2011. Tugboats had an operating loss of
Which of the following best describes the primary purpose of audit procedures? A. To detect all errors or fraudulent activities. B. To comply with generally accepted accounting principles.
Which of the following procedures would an auditor most likely perform to verify management's assertion of completeness?
Farnsworth Inc. declared a $500,000 cash dividend. It currently has 10,000 shares of 8%, $100 par value cumulative preferred stock outstanding. It is one year in arrears on its preferred stock. How
As the acceptable level of detection risk decreases, an auditor may change the
The fair value of Willow Company's common stock was $57 per share at December 31, 2013 and $63 per share at December 31, 2014. Willow acquired 7,000 shares of its own common stock at $60 per share o
On June 15, Handel Corporation reacquired 10,000 shares of its $10 par value common stock for $22 per share. Handel uses the cost method to account for treasury stock. prepare the journal entry to r
Which of the following is not an important consideration in an auditor's evaluation of an entity's business risk?
The risk that an auditor will conclude, based on substantive procedures, that a material error does not exist in an account balance when, in fact, such an error does exist is referred to as :
Roberts Corporation has 150,000 shares of $10 par common stock authorized. The following transactions took place during 2013, the first year of the corporation's existence: Sold 20,000 shares of com
An auditor knows that an audit client operating in an industry in which common stock is valued based on the price-earnings ratio will soon make an initial public offering. All of the following are t
Colfax Corporation enters into an agreement with Reynolds Rentals on January 1, 2014 for the purpose of leasing a machine to be used in its manufacturing operations.
Which of the following characteristics most likely would heighten an auditor's concern about the risk of intentional manipulation of financial statements?
Which of the following arranges the general types of audit tests in the order they are normally performed in an audit?
Which of the following procedures would an auditor most likely include in the initial planning of an examination of financial statements?
On December 31, 2013, the 11% bonds payable of Goodly Corporation had a carrying amount of $2,060,000. The bonds, which had a face value of $2,000,000 were issued at a premium to yield 10%. Goodly u
An auditor is required to establish an understanding with a client regarding the responsibilities for each engagement. This understanding generally includes :
Lillian Properties leased a building to Hopping Industries for a ten year term at an annual rental of $250,000. The lease began January 1, 2013,
Which of the following situations would most likely require special audit planning? A. Some items of factory and office equipment do not bear identification numbers. B. Depreciation methods used on th
Stewart Company acquired Meyer Manufacturing on January 1, 2013 for $9,500,000 and recorded goodwill of $2,000,000 as a result of that purchase.
An auditor who discovers that a client's employees paid small bribes to municipal officials most likely would withdraw from the engagement if :
Innovative Technologies, Inc. incurred research and development costs of $150,000 and legal fees of $42,000 to acquire a patent. The patent has a legal life of 20 years and a useful life of 10 years
When a CPA is approached to perform an audit for the first time, the CPA should make inquiries of the predecessor auditor. This is a necessary procedure because the predecessor may be able to provid
Hodgson Company's December 31, 2014 balance sheet reports assets of $8,500,000 and liabilities of $4,500,000. All of Hodgson's book values approximate their fair value,