Question

An important aspect of analyzing a client’s information is the use of ratios. Which one of the following statements is true?

Question 14 options:

a)	The proper ratios to use to determine if a company can meet existing obligations as they become due are the debt-to-equity and profit margin ratios.

b)	The most useful analytical tools to assess long-run solvency include the debt-to-equity ratio.

c)	When return on equity or return on investments is the critical concern, the most useful ratios include earnings per share, gross profit margin and receivables turnover.

d)	Contribution margin analysis is useful in evaluating the company’s ability to manage its productive assets efficiently.

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Question 15 (1 point)

Existence is when management asserts that:

Question 15 options:

a)	Inventory that is present is recorded in the general ledger.

b)	Inventory is measured appropriately.

c)	Inventory occurs.

d)	Inventory that is recorded on the general ledger is present in the warehouse.

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Question 16 (1 point)

An auditor asks, “Have the assets, liabilities, and equity of the entity been included in the financial statements at the correct amount?”

Which of the following assertions does the auditor’s question describe?

Question 16 options:

a)	Occurrence and rights and obligations

b)	Completeness

c)	Classification

d)	Valuation and allocation

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Question 17 (1 point)

You are working on the cost of sales section for a farming client, John’s Cow Farm. You have been examining invoices for the purchase cost of cow feed to ensure that the correct amount is recorded in the general ledger. Which of the following assertions are you addressing with this procedure?

Question 17 options:

a)	Valuation and allocation

b)	Completeness

c)	Occurrence

d)

Accuracy

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Question 18 (1 point)

You are working on the audit of Smith’s Shovels Inc. Your audit manager has assigned you the revenue section and has asked you to obtain the last five shipping documents for the year. You are to trace these shipping documents to the related invoices and to the general ledger. Which of the following assertions, with respect to revenues, is best addressed by this procedure?

Question 18 options:

a)	Valuation and allocation

b)

Accuracy

c)

Cut-off

d)	Occurrence

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Answer 1

An important aspect of analyzing a client’s information is the use of ratios. Which one of the following statements is true?

The most useful analytical tools to assess long-run solvency include the debt-to-equity ratio.

Explanation;

Long term solvency ratios indicate about the health of the company by evaluating long term debt and interest on that debt. The most common ratio of solvency is debt to equity ratio

Existence is when management asserts that:

d)	Inventory that is recorded on the general ledger is present in the warehouse.

The amount of inventory that has been recorded in the general ledger must be present in the warehouse.

Question 16 (1 point)

An auditor asks, “Have the assets, liabilities, and equity of the entity been included in the financial statements at the correct amount?”

Which of the following assertions does the auditor’s question describe?

d)	Valuation and allocation

When the assets liabilities, and equity of the entity been included in the financial statements at the correct amount, the auditor is describing valuation and allocation assertion.

Question 17 (1 point)

You are working on the cost of sales section for a farming client, John’s Cow Farm. You have been examining invoices for the purchase cost of cow feed to ensure that the correct amount is recorded in the general ledger. Which of the following assertions are you addressing with this procedure?

d)

Accuracy

The auditor is describing the accuracy under which the all transactions are recorded at correct amount without any error.

Question 18 (1 point)

You are working on the audit of Smith’s Shovels Inc. Your audit manager has assigned you the revenue section and has asked you to obtain the last five shipping documents for the year. You are to trace these shipping documents to the related invoices and to the general ledger. Which of the following assertions, with respect to revenues, is best addressed by this procedure?

d)	Occurrence

Audit manager is addressing about occurrence. In this case he wants to tally the shipping documents with the related invoices and to the general ledger for confirming whether actually the goods have been shipped or not.