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Auditing & Assurance 101 Practice Test: Audit of the Capital Acquisition and Repayment Cycle
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The capital acquisition and repayment cycle is a transaction cycle that involves acquiring capital resources and repaying the capital. Capital resources can come in the form of interest-bearing debt and owners' equity.  The acquisition and payment cycle is made up of two groups of transactions: the acquisition class and the cash disbursements. The acquisition class typically involves a debit to inventory or a cost and a credit to accounts payable. The cash disbursements class typically involves a debit to accounts payable and a credit to cash.  The five phases of the acquisition and payment... Show more
Auditing & Assurance 101 Practice Test: Audit of the Capital Acquisition and Repayment Cycle
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25 Questions

1. Public companies whose stock is listed on a stock exchange must employ an independent registrar.
2. Which of the following audit tests would provide evidence regarding the balance-related audit objective of existence for an audit of notes payable?
3. Which of the following audit objectives is least important in the audit of capital stock and paid-in-capital in excess of par?
4. The audit procedure 'examine duplicate copies of notes payable to determine whether the notes payable were dated on or before the balance sheet date' is done for which of the following balance-related audit objective?
5. The authorization of an issuance of capital stock normally includes all but which of the following?
6. The two most important balance related objectives in notes payable are:
7. In the audit of notes payable, it is common to include tests of principal and interest payments as a part of the audit of the acquisitions and payment cycle because the payments are in the cash disbursements journal that is being sampled. It is also normal to test these transactions as part of the capital acquisitions and repayment cycle because:
8. When a dividend is declared by the board of directors, the source for determining who should receive dividend checks is the:
9. When a company maintains its own records of stock transactions and outstanding stock, internal controls must be adequate to ensure that:
10. The audit of owners' equity of public and private companies is very different. Which of the following is not one of these differences?
11. Notes payable are generally for short periods of time.
12. When there are not numerous transactions involving notes payable during the year, the normal starting point for the audit of notes payable is:
13. The primary concern in determining whether retained earnings is correctly disclosed on the balance sheet is:
14. A shareholders' capital stock master file is a record of the issuance and repurchase of capital stock over the life of the corporation.
15. Which of the following balance-related audit objectives is not applicable to the audit of notes payable?
16. Any company that has more than 10 percent of its stock owned by one person is considered to be closely held.
17. Which of the following is not an important control over notes payable?
18. The audit objective to determine that notes payable in the schedule actually exist is verified by the test of details of balances procedure to:
19. The audit procedure 'Examine notes payable, minutes, and bank confirmations for restrictions' is performed when verifying the classification objective for notes payable.
20. When auditing the capital acquisition and repayment cycle, it is common to verify each transaction taking place in the cycle for the entire year as a part of verifying the balance sheet accounts.
21. Any company with stock listed on a securities exchange is required to engage a(n) ________.
22. A prior period adjustment may result in a debit or credit to a company's retained earnings account.
23. Examining the minutes of the board of directors' meetings for proper authorization ordinarily tests the occurrence objective for capital stock transactions.
24. Examining the minutes of the board of directors' meetings for proper authorization ordinarily tests the existence objective for capital stock transactions.
25. The record of the issuance and repurchase of capital stock for the life of the corporation is maintained in the:

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