Recent Question

Analytical procedures provide fewer types of evidence 1. (Public) In the audit of a public company, computer controls must be tested if they are considered to be key controls for reducing the likelihood of material misstatements in the financial statements. a. True b. False 2. Procedures to obtain an understanding of internal control may suffice for tests of controls when the auditor is assessing automated controls. a. True b ...

Other / Other 14 Apr 2016

Companies HD and LD have the same sales, tax rate, interest rate 1. You observe that a firm’s ROE is above the industry average, but its profit margin and debt ratio are both below the industry average. Which of the following statements is CORRECT? a. Its total assets turnover must be above the industry average. b. Its return on assets must equal the industry average. c. Its TIE ratio must be below the industry average. d. Its ...

Other / Other 14 Apr 2016

Suppose a bank offers to lend you $10,000 for 1 year on a loan 1. Suppose Community Bank offers to lend you $10,000 for one year at a nominal annual rate of 8.00%, but you must make interest payments at the end of each quarter and then pay off the $10,000 principal amount at the end of the year. What is the effective annual rate on the loan? a. 8.24% b. 8.45% c. 8.66% d. 8.88% e. 9.10% 2. Suppose a bank offers to lend you $10, ...

Other / Other 14 Apr 2016

A new firm is developing its business plan 1. A new firm is developing its business plan. It will require $615,000 of assets, and it projects $450,000 of sales and $355,000 of operating costs for the first year. Management is reasonably sure of these numbers because of contracts with its customers and suppliers. It can borrow at a rate of 7.5%, but the bank requires it to have a TIE of at least 4.0, and if the TIE falls below this leve ...

Other / Other 14 Apr 2016

ou plan to analyze the value of a potential investment 1. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment? a. The cash flows are in the form of a deferred annuity, and they total to $100,000. You learn that the annuity lasts for 10 years rather than 5 years, hence that each paym ...

Other / Other 14 Apr 2016

Three factors the auditor considers when assessing control risk 1. Contrast the circumstances in which the auditor would choose not to test controls with those in which he or she would perform tests of controls. 2. Three factors the auditor considers when assessing control risk are: the auditor’s belief concerning the effectiveness of internal controls, the results of tests of controls, and the cost-effectiveness of a redu ...

Other / Other 14 Apr 2016

Your girlfriend just won the Florida lottery 1. Your uncle has $300,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, starting at the end of this year. He also wants to have $25,000 left to give you when he ceases to withdraw funds from the account. For how many years can he make the $35,000 withdrawals and still have $25,000 left in the end? a. 14.21 b. 14.96 c. 15.71 d. 16.4 ...

Other / Other 14 Apr 2016

You have a chance to buy an annuity that pays $5,000 at the beginning 1. You are considering two equally risky annuities, each of which pays $5,000 per year for 10 years. Investment ORD is an ordinary (or deferred) annuity, while Investment DUE is an annuity due. Which of the following statements is CORRECT? a. The present value of ORD must exceed the present value of DUE, but the future value of ORD may be less than the future value ...

Other / Other 14 Apr 2016

The purpose of tests of controls is to provide reasonable assurance 1. In which stage(s) of an audit are analytical procedures not performed? a. In the planning stage. b. In the test of controls stage. c. In the completion stage. d. In conjunction with tests of transactions and tests of details of balances. 2. Tests of controls may include which of the following types of evidence? Reperformance Observation a. Yes Yes ...

Other / Other 14 Apr 2016

Which of the following is ordinarily designed to detect possible material 1. At what point in the audit are tests of details most appropriately designed? a. Engagement evaluation. b. Planning. c. Testing. d. Communication of material weaknesses. 2. (Public) Which of the following is/are performed in an audit of internal control over financial reporting? Procedures to obtain an understanding of internal control Test ...

Other / Other 14 Apr 2016