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Auditing: liabilities, internal control, treasury stock

_____ 17. Which of the following internal control procedure that is usually applied to accounts payable?

A. Periodic confirmation of accounts payable
B. Mailing statements to vendors detailing their account
C. Periodic aging of accounts payable
D. Reconciliation of vendor statements with accounts payable

_____ 18. The auditors' search for unrecorded liabilities is completed:

A. During an interim period
B. At the balance sheet date
C. Subsequent to the balance sheet date
D. At any time during the examination

_____ 19. Internal control over bonds payable is best when:

A. The company utilized the services of a bond trustee.
B. The company segregates approval from issuance of the bonds.
C. Bonds are countersigned by two officers
D. Bonds are serially numbered

_____ 20. The audit approach for acquired treasury stock will normally include:

A. Confirmation with shareholders
B. Inspection of certificates
C. Inspection of cash receipts entries
D. Recompilation of all gains and losses

_____ 21. Changes in capital stock accounts should normally be approved by:

A. The board of directors
B. The audit committee
C. The stockholders
D. The president

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Solution Preview

17. Since internal control procedures test the system inside the company, a and b would not be correct because it involves going outside the company. Reviewing the aging of accounts payable doesn't tell you much about the system either, but reconciling invoice with statements does.

18. The search for unrecorded liabilities is conducted up to the date ...

Solution Summary

The responses to the auditing multiple choice questions are answered with a short paragraph for each explaining the theory for the choice of answer. The responses usually include the reasons why other choices are incorrect.