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What are the major accounts of the capital acquisition and repayment cycle?
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What are the major accounts of the capital acquisition and repayment cycle?
- long-term liabilities and related accounts
examples?
Copyright 2003 Pearson Education Canada Inc.
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What are the major accounts of the capital acquisition and repayment cycle?
- long-term liabilities and related accounts
~ notes payable ~ contracts payable ~ mortgages payable ~ bonds payable ~ interest expense ~ accrued interest ~ cash
Copyright 2003 Pearson Education Canada Inc.
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What are the major accounts of the capital acquisition and repayment cycle?
- long-term liabilities and related accounts - owners equity accounts
examples?
Copyright 2003 Pearson Education Canada Inc.
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What are the major accounts of the capital acquisition and repayment cycle?
- long-term liabilities and related accounts - owners equity accounts
~ common stock ~ preferred stock ~ treasury stock ~ contributed surplus in ~ proprietorship capital ~ partnership capital
Copyright 2003 Pearson Education Canada Inc.
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What are the major accounts of the capital acquisition and repayment cycle?
- long-term liabilities and related accounts - capital stock accounts - retained earnings and appropriations
Copyright 2003 Pearson Education Canada Inc.
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What are the major accounts of the capital acquisition and repayment cycle?
- long-term liabilities and related accounts - capital stock accounts - retained earnings and appropriations - dividends declared and payable
Copyright 2003 Pearson Education Canada Inc.
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In auditing the capital acquisition and repayment cycle, the auditor should consider:
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In auditing the capital acquisition and repayment cycle, the auditor should consider:
Relatively few transactions affect the account balances, but each transaction is often highly material in amount.
Copyright 2003 Pearson Education Canada Inc.
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In auditing the capital acquisition and repayment cycle, the auditor should consider:
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In auditing the capital acquisition and repayment cycle, the auditor should consider:
There is a legal relationship between the client and the holder of the stock, bond, or similar ownership document.
Copyright 2003 Pearson Education Canada Inc.
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In auditing the capital acquisition and repayment cycle, the auditor should consider:
There is a direct relationship between the interest and dividends account and debt and equity.
Copyright 2003 Pearson Education Canada Inc.
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In auditing the internal controls related to long-term liabilities, the auditor will consider:
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In auditing the internal controls related to long-term liabilities, the auditor will consider:
- proper authorization for issues of notes or bonds
Ace Company Bond
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In auditing the internal controls related to long-term liabilities, the auditor will consider:
- proper authorization for issues of notes or bonds - adequate controls over payment of interest and principal
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In auditing the internal controls related to long-term liabilities, the auditor will consider:
- proper authorization for issues of notes or bonds - adequate controls over payment of interest and principal - proper documents and records
Copyright 2003 Pearson Education Canada Inc.
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In auditing the internal controls related to long-term liabilities, the auditor will consider:
- proper authorization for issues of notes or bonds - adequate controls over payment of interest and principal - adequate documents and records - periodic independent verification
Copyright 2003 Pearson Education Canada Inc.
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What are the primary audit objectives with regard to longterm liability account balances?
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What are the primary audit objectives with regard to longterm liability account balances?
- completeness
notes payable
contracts payable
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What are the primary audit objectives with regard to longterm liability account balances?
- completeness - accuracy
Copyright 2003 Pearson Education Canada Inc.
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What are the primary audit objectives with regard to longterm liability account balances?
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perform analytical procedures to test the reasonableness of long-term liabilities and interest expense
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confirm debt balances, interest payments, and client compliance with contractual agreements with the creditors
auditor creditor
Canada 48
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for all long-term liabilities, recalculate interest expense, interest payable, and amortizations of discounts or premiums
Copyright 2003 Pearson Education Canada Inc.
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cash receipts journal description _ $$ _ May 23, 2004 Bank loan 14,000
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Debt Covenant Bank of Montreal hereby loans Ace Co. $14,000 on 5/23/04
Copyright 2003 Pearson Education Canada Inc.
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Ace Corporation
pay to the order of
date 11/23/04
324
Bank of Montreal
$ 700.00
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Ace Corporation
pay to the order of
date 11/2304
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Canadian Bank
$ 700.00
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What are the auditors primary concerns with regard to owners equity?
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What are the auditors primary concerns with regard to owners equity?
- authorization
Copyright 2003 Pearson Education Canada Inc.
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What are the auditors primary concerns with regard to owners equity?
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What are the auditors primary concerns with regard to owners equity?
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Owners Equity Audit Procedures perform analytical procedures to test the reasonableness of owners equity accounts (including dividends)
Copyright 2003 Pearson Education Canada Inc.
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READ:
- articles of incorporation, bylaws
Ace Company Articles of Incorporation
Copyright 2003 Pearson Education Canada Inc.
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READ:
- articles of incorporation, bylaws - minutes of meetings
Note discussion of dividends, stock options, stock issues, etc.
Copyright 2003 Pearson Education Canada Inc.
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Confirm shares outstanding with the independent registrar and the stock transfer agent.
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If the client does not use an independent registrar and stock transfer agent, the auditor must examine the stock certificate records and test any changes.
Copyright 2003 Pearson Education Canada Inc.
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Board Minutes
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Deposits:
Payments: 1/26 $4,300
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Ace Corporation
pay to the order of
date 1/23/04
324
Shareholders
$4,300.00
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Ace Corporation
pay to the order of
date 1/23/04
324
Shareholders
$4,300.00
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preferred
Copyright 2003 Pearson Education Canada Inc.
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preferred
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