The Journal of Accountancy Official Organ of the American Institute of Accountants The candidate is required to answer all of the fol lowing questions: 1. You are required to make a detailed cash audit for three years ending October 31, 1917. You find a disbursement for "Rent October, 1914, $1,000.00" on November 6, 1914. You are told the receipt is missing and the duplicate cannot be obtained. You are shown as a voucher a check dated November 6, 1914, payable to the landlord or order for $1,000.00, endorsed with a rubber stamp and marked by the clients' bankers "paid." State with your reasons whether you would accept this as sufficient evidence that the payment was made as recorded and, if not, what course you would adopt. 2. How would you proceed in a cash audit of a club or fraternal order to ascertain whether the treasurer had charged himself with all the dues paid by members to him? 3. You receive the following letter: We have never had our books audited but are contemplating an audit now. Two of our friends have recommended you to us. Both have businesses similar to ours but their advices as to the time required are very different. Do you carry out different kinds of audits? If so, what are the different kinds and under what circumstances do you recommend one kind and when another? Write a reply. 4. What different classes of obligations and liabilities should be disclosed in an audit for credit purposes? How would you verify those recorded on the books and how would you try to discover any not so recorded? 5. You are employed to instal a system for a large business which your clients have acquired. Your recommendations are adopted at the beginning of a fiscal year. At the close of the year you are elected by the stockholders to audit the accounts for the year. State what procedure you would follow in examining the charges to property accounts, and the objects of the various steps in that procedure. 6. What are the essentials of an audit certificate in an audit for credit purposes? 7. How far are the duties of an accountant auditing the books of a company affected by the character and extent of the company's system of internal check? 8. In auditing the accounts of a trustee under a will, what special matters require to be dealt with which do not arise in the audit of a business concern? 9. Prepare a bank reconciliation showing at least three different classes of items constituting the difference between the figures being reconciled and state how far you would investigate such items in a cash audit. 10. A company has insured the life of its president for its own benefit, and is carrying the amount of premiums paid in its balance-sheet. What position would you as an auditor take in regard to these premiums? AMERICAN INSTITUTE OF ACCOUNTANTS 1. BOARD OF EXAMINERS Commercial Law NOVEMBER 15, 1917, 1:30 P. M. TO 5 P. M. The Negotiable Instrument and Bankruptcy Acts will govern the correctness of the answers of questions I to 6 inclusive. Negotiable Instruments Answer two of the following four questions: What is the purpose of a protest? What instruments must be and what may be protested? What instruments need no protest? 2. New York, October 1, 1917. One month after date I promise to pay to John Smith Five Hundred Dollars for value received, negotiable and payable without defalcation or discount. (Signed) HENRY JONES. Is the above note negotiable or not? Give reasons. 3. What is the legal effect of endorsing an instrument in blank? 4. A past due note, endorsed by the payee, but not marked paid, is found by an administrator among the deceased maker's effects. What is the rule of law as to the presumption of its payment? Bankruptcy Answer one of the two following questions: 5. Who may take advantage of the bankruptcy act voluntarily, and who may be forced into involuntary bankruptcy? 6. Mention the principal acts which constitute acts of bank ruptcy. Answers to the following questions are governed by the common law: Contracts Answer two of the three following questions: 7. What does a seller impliedly warrant in the sale of a chattel? 8. When may a creditor enforce a contract with a minor? 9. Explain what is meant by: Answer two of the three following questions: 10. What is meant by cumulative voting? Describe and state when it is frequently practised. 11. The president and secretary of a mercantile corporation seal, execute and deliver in the company's name a mortgage on the company's real estate, without the authority of the directors. The company receives adequate value therefor. Can the holder foreclose in the case of default? Give reasons. 12. Describe briefly the more important powers and duties of the directors of a mercantile or manufacturing corporation, and state some acts (1) which would render the directors personally liable (2) be ultra vires on the part of the corporation. Explain what ultra vires means. Partnership Answer both of the following questions: 13. A B and C respectively contribute ten, eight and six thousand dollars to the capital of a partnership. How should the resulting losses and gains be distributed in the absence of any agreement as to their distribution? 14. A and B are partners. A dies. The assets are found to be worth only 75 per cent. of the liabilities in liquidation. A's estate is solvent, while B is insolvent. What are the rights of the firm's creditors against A's assets not invested in the partnership, and what are the rights of B's personal creditors as to the partnership assets? State the rule governing in such cases. Income Tax Answer one of the two following questions: 15. Under what circumstances and to what extent may losses incurred in speculation be deducted from gross income of an individual and a corporation respectively in ascertaining net income subject to the federal income tax? 16. When must returns of net income be made under the federal income tax law and when is the tax thereon payable? Who are required to make such returns? |