Accountant Terms Flashcards

The auditor can best verify a client's bond sinking fund transactions and year-end balance by:
A) Confirmation with individual holders of retired bonds.
B) Confirmation with the bond trustee.
C) Recomputation of interest expense, interest payable, and amortization of bond discount or premium.
D) Examination and count of the bonds retired during the year.

A material weakness involves a reasonable possibility that what size misstatement will not be prevented or detected?
A) Immaterial.
B) Material.
C) More than inconsequential.
D) Substantial.

Which of the following material events occurring subsequent to the balance sheet date would require an adjustment to the financial statements before they could be issued?
A) Sale of long-term debt or capital stock.
B) Loss of a plant as a result of a flood.
C) Major purchase of a business which is expected to double the sales volume.
D) Settlement of litigation in excess of the recorded liability.

A client's previous two years financial statements understated estimated warranty payable by $30,000 and $50,000 respectively, immaterial amounts. This year the auditors estimate that the accrual is understated by an additional $60,000. In this year's audit $55,000 represents a material amount. Assuming that the entire understatement is to be recorded, following SEC SAB 108 the decrease in this year's income due to these understatements is:
A) $0
B) $60,000
C) $110,000
D) $140,000

Specific misstatement in one of a client's 2,000 accounts receivable is referred to as a(n):
A) Extrapolation difference.
B) Known misstatement.
C) Likely misstatement.
D) Projected misstatement.

An auditor identified a material weakness in internal control in August. The client was informed and the client corrected the material weakness prior to year-end (December 31); the auditor agrees that the correction eliminates the material weakness prior to year-end. The appropriate audit report on internal control under PCAOB standards on reporting on internal control is:
A) Adverse.
B) Unqualified.
C) Disclaimer.
D) Qualified.

Which of the following is not one of the attribute standards of the IIA's Standards for the Professional Practice of Internal Auditing?
A) Independence and objectivity.
B) Outsourcing.
C) Proficiency and professional care.
D) Purpose, authority, and responsibility.

In an audit in accordance with generally accepted auditing standards, the auditors must test compliance with those laws and regulations that:
A) Have a direct and material effect on the financial statements.
B) Have a direct and material effect on major federal programs.
C) Have a material direct or indirect effect on the financial statements.
D) Have a material effect on major or nonmajor programs.

Which of the following is an analytical procedure that should be applied to the income statement?
A) Select sales and expense items and trace amounts to related supporting documents.
B) Ascertain that the net income amount in the statement of cash flows agrees with the net income amount in the income statement.
C) Obtain from the proper client representatives, the beginning and ending inventory amounts that were used to determine costs of sales.
D) Compare the actual revenues and expenses with the corresponding figures of the previous year and investigate significant differences

Which of the following statements is correct relating to common stock certificates of a publicly traded company that uses the services of a transfer agent?
A) Stock certificates should exist for all outstanding stock and be held by the owner of the stock.
B) Stock certificates should exist for all outstanding stock and be held either by the owner of the stock or a representative of the owner (e.g., brokerage firm).
C) A lack of stock certificates is ordinarily considered a material weakness in internal control.
D) Stock certificates often are not issued in today's electronic environment.

The auditors' best course of action with respect to "other information (not including required supplemental information)" included in an annual report containing the auditors' report is to:
A) Indicate in the auditors' report, that the "other financial information" is only compiled.
B) Consider whether the "other financial information" is accurate by performing a limited review.
C) Obtain written representations from managements as to the material accuracy of the "other financial information."
D) Read and consider the manner of presentation of the "other financial information."

The auditors include an emphasis of matter paragraph in report with an unmodified opinion in order to emphasize that the entity being reported upon is a subsidiary of another business enterprise. The inclusion of this paragraph:
A) Is appropriate and would not negate the unmodified opinion.
B) Is considered a qualification of the opinion.
C) Is a violation of generally accepted reporting standards if this information is disclosed in notes to the financial statements.
D) Necessitates a revision of the opinion paragraph to include the phrase "with the foregoing explanation."

Analytical procedures are required as a part of the:
A) Detailed tests of balances.
B) Internal control assessment.
C) Procedures performed near the end of the audit.
D) Substantive testing.

Which of the following is an auditor most likely to confirm from the transfer agent and registrar?
A) Total shares of stock issued.
B) Restrictions on the payment of dividends.
C) Total market value of outstanding shares of stock.
D) Gains from sale of treasury stock.

Which of the following is not explicitly included in an audit report for a nonpublic company?
A) A statement that the auditor believes that his or her audit provides a reasonable basis for expressing negative assurance.
B) A statement that the auditor's responsibility is to express an opinion on the financial statements.
C) A statement that the financial statements are the responsibility of management.
D) A title with the word "independent."