Question 1

Examining the minutes of the board of directors' meetings for proper authorization ordinarily tests the occurrence objective for capital stock transactions.

Accepted Answer

Examining the minutes of the board of directors' meetings is a standard procedure to check whether proper authorization was obtained for capital stock transactions. This helps in testing the occurrence objective, which ensures that the transactions actually occurred and were properly recorded in the financial statements. By verifying the minutes, auditors can ensure that the company's capital stock transactions were approved by the board of directors in accordance with applicable laws and regulations.

Question 2

For most companies, the only transactions involving retained earnings are net earnings for the year and dividends declared.

Accepted Answer

Retained earnings represent the accumulated balance of a company's net earnings that are not paid out as dividends. Therefore, the two main transactions involving retained earnings are net earnings for the year (which increase retained earnings) and dividends declared (which decrease retained earnings). Other transactions that can affect retained earnings include adjustments to prior period financial statements and changes in accounting policies, but these are less common.

Question 3

Auditors can test whether dividend payments have been made to shareholders by selecting a sample of recorded dividend payments and agreeing payee information to the records produced by the stock transfer agent.

Accepted Answer

This statement is true as auditors can verify whether dividend payments have been made to shareholders by selecting a sample of recorded dividend payments and comparing them to the records produced by the stock transfer agent. This helps ensure that dividends have been correctly paid to the right individuals and in the correct amounts.

Question 4

The emphasis in the audit of dividends is on the ending balance rather than the transactions.

Accepted Answer

The emphasis in the audit of dividends is on the transactions, rather than just the ending balance. The auditor needs to verify that the dividends were properly authorized, recorded correctly, and paid out to the correct shareholders in the correct amounts. They will review dividend declarations, board meeting minutes, cash disbursements, and shareholder records to ensure accuracy and completeness of dividends declared and paid.

Question 5

State the four most important audit objectives for capital stock and describe how the auditor typically verifies each of the four objectives.

Accepted Answer

The answer of State the four most important audit objectives...

Question 6

Auditors can test whether dividend payments have been made to shareholders by selecting a sample of recorded dividend payments and agreeing payee information on the cancelled check to the dividend records.

Accepted Answer

This is a valid test that auditors can use to verify whether dividend payments have actually been made to shareholders. By selecting a sample of recorded dividend payments and cross-referencing them with cancelled checks, auditors can ensure that payee information matches the dividend records and that payments were actually made.

Question 7

If there is an adjustment to retained earnings resulting from a change in accounting principle, the auditor should test the prior period effects of the change, but not test the entry to adjust prior period balances or retained earnings.

Accepted Answer

When there is an adjustment to retained earnings resulting from a change in accounting principle, the auditor should test both the prior period effects of the change and the entry to adjust prior period balances or retained earnings to ensure the adjustment is appropriate and accurately reflects the impact of the change in accounting principle.

Question 8

Examining the minutes of the board of directors' meetings for proper authorization ordinarily tests the existence objective for capital stock transactions.

Accepted Answer

The answer of Examining the minutes of the board of...

Question 9

The accuracy of a dividend declaration can be audited by recalculating the amount on the basis of the dividend per share times the number of shares outstanding.

Accepted Answer

Recalculating the dividend amount by multiplying the dividend per share by the number of shares outstanding is a standard method of verifying the accuracy of a dividend declaration. This is because the dividend per share is typically fixed and the number of shares outstanding is a matter of public record, so it's easy to verify whether the declared dividend matches the recalculated amount.

Question 10

Match between columns
                        Premises: an outside person engaged by a corporation to maintain the stockholder records
an outside person engaged by a corporation to make sure that its stock is issued in accordance with capital stock provisions in the corporate charter and authorizations by the board of directors
a record of the issuance and repurchase of capital stock for the life of the corporation
the normal starting point for the audit of notes payable; includes detailed information of all transactions related to notes payable that took place during the year
an entity that is required to engage an independent registrar
the cycle that concerns the acquisition of capital resources through interest-bearing debt and owners' equity and repayment of the capital

Accepted Answer

The Answer of capital acquisition and repayment cycle and publicly is...

Quiz 22: Audit of the Capital Acquisition and Repayment Cycle