Connect Access Card for Principles of Auditing & Other Assurance Services
21st Edition
ISBN: 9781260299366
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Chapter 15, Problem 19RQ
To determine
Explain the source of information regarding a year-end list of stockholders when the services of the independent stock registrar or transfer agent are not used.
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The following audit procedures are commonly performedby auditors in the verification of owners’ equity:1. Review the articles of incorporation and bylaws for provisions about owners’ equity.2. Analyze all owners’ equity accounts for the year and document the nature of anyrecorded change in each account.3. Account for all certificate numbers in the capital stock book for all shares outstanding.4. Examine the stock certificate book for any stock that was cancelled.5. Review the minutes of the board of directors’ meetings for the year for approvalsrelated to owners’ equity.6. Recompute earnings per share.7. Review debt provisions and senior securities with respect to liquidation preferences,dividends in arrears, and restrictions on the payment of dividends or the issue of stock.a. State the purpose of each of these seven audit procedures.b. List the type of misstatements the auditors can uncover by the use of each auditprocedure.
The attached file contains hypothetical data for working this problem. Goodman Corporation’s and Landry Incorporated’s stock prices and dividends, along with the Market Index, are shown in the file. Stock prices are reported for December 31 of each year, and dividends reflect those paid during the year. The market data are adjusted to include dividends.
On a stand-alone basis which corporation is the least risky?
Monicker Co. engaged the audit firm of Gasner & Gasner to audit its financial statements that Monicker was going to use in connection with a public offering of its securities. Monicker's stock regularly trades on the NASDAQ. The audit was completed and the auditor issued an unqualified opinion on the financial statements, which Monicker submitted to the SEC along with the registration statement. Three hundred thousand shares of Monicker common stock were sold to the public at $13.50 per share. Eight months later, the stock fell to $2 per share when it was disclosed that several large loans to two "paper" companies owned by one of the directors were worthless. The loans were secured by the stock of the borrowing corporation and by Monicker stock owned by the director. These facts were not disclosed in the financial statements. The director and the two corporations are insolvent. Considering these facts, indicate whether each of the following statements is true or false, and briefly…
Chapter 15 Solutions
Connect Access Card for Principles of Auditing & Other Assurance Services
Ch. 15 - What does the trust indenture used by a...Ch. 15 - Long-term creditors often insist upon placing...Ch. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Prob. 8RQCh. 15 - Prob. 9RQCh. 15 - Prob. 10RQ
Ch. 15 - Mansfield Corporation has outstanding an issue of...Ch. 15 - Prob. 12RQCh. 15 - Prob. 13RQCh. 15 - What do you consider to be the most important...Ch. 15 - What is the primary responsibility of an...Ch. 15 - In the audit of a small corporation that issues...Ch. 15 - Prob. 17RQCh. 15 - Prob. 18RQCh. 15 - Prob. 19RQCh. 15 - Corporations sometimes issue their own capital...Ch. 15 - Prob. 21RQCh. 15 - Prob. 22RQCh. 15 - Prob. 23RQCh. 15 - Prob. 24RQCh. 15 - Prob. 25RQCh. 15 - Prob. 26RQCh. 15 - Prob. 27QRACh. 15 - Prob. 28QRACh. 15 - Prob. 29QRACh. 15 - You are retained by Columbia Corporation to audit...Ch. 15 - Prob. 31QRACh. 15 - Prob. 32AOQCh. 15 - Prob. 32BOQCh. 15 - Prob. 32COQCh. 15 - Prob. 32DOQCh. 15 - Prob. 32EOQCh. 15 - When a client uses paper stock certificates, an...Ch. 15 - Prob. 32GOQCh. 15 - The auditors can best verify a clients bond...Ch. 15 - Prob. 32IOQCh. 15 - All corporate capital stock transactions should...Ch. 15 - Prob. 32KOQCh. 15 - Prob. 32LOQCh. 15 - Prob. 32MOQCh. 15 - Prob. 32NOQCh. 15 - Prob. 32OOQCh. 15 - An auditor most likely would inspect loan...Ch. 15 - Prob. 32QOQCh. 15 - Match the following definitions (or partial...Ch. 15 - Prob. 34PCh. 15 - Prob. 35PCh. 15 - Prob. 36PCh. 15 - Prob. 37P
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- The prescribed accounting treatment for stock dividends implicitly assumes that shareholders are fooled by "small" stock dividends and benefit by the market value of their additional shares. Explain this statement. Is it logical? You are in your second year as an auditor with Dantly and Regis, a regional CPA firm. One of the firm’s long-time clients is Mayberry-Cleaver Industries, a national company involved in the manufacturing, marketing, and sales of hydraulic devices used in specialized manufacturing applications. Early in this year’s audit, you discover that Mayberry-Cleaver has changed its method of determining inventory from LIFO to FIFO. Your client’s expectations is that FIFO is consistent with the method used by some other companies in the industry. Upon further investigation, you discover an executive stock option plan whose term calls for a significant increase in the shares available to executives if net income this year exceeds $44 million. Some quick calculations…arrow_forwardKulikowski Inc., a client, is considering the authorization of a 10% common stock dividend to common stockholders. The financial vice president of Kulikowski wishes to discuss the accounting implications of such an authorization with you before the next meeting of the board of directors. Instructions a. The first topic the vice president wishes to discuss is the nature of the stock dividend to the recipient. Discuss the case against considering the stock dividend as income to the recipient. b. The other topic for discussion is the propriety of issuing the stock dividend to all “stockholders of record” or to “stockholders of record exclusive of shares held in the name of the corporation as treasury stock.” Discuss the case against issuing stock dividends on treasury shares.arrow_forwardyou are an auditor in charge of the audit of steffen corporation. in the audit of investments, you have just been given the following list of securities held by Steffens Corporation at December 31, 20x3.. 10000 shares of microsoft corp. market value $599,100. 6,000 shares of general motors corp. 216500. 8,000 shares of beta corporation (not publicly traded). 400 holloway lodging corp. 7.5% convertible bonds 555,000. a. identify the potential audit problems that may be indicated by the schedule. b. to value the shares of Beta corporations, management has employed a securities valuation firm. Explain the audit considerations involved in auditing the value developed by the valuation firm.arrow_forward
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