The following questions are part of an internal con trol questionnaire for the long-term debt and owners' equity process. Answer the fol lowing internal control questions for the long-term debt and owners' equity process:
a. Did the board of directors authorize direct borrowings on notes payable?
b. Did the board of directors approve cash dividends?
c. Did senior officers review footnotes for long-term debt and owners' equity?
d. Did the board of directors approve stock options issued to management?
For each preceding question:
(1) Describe the misstatement in the financial statements that could occur if the client answered "no." What assertion in the financial statements is the misstatement related to?
(2) If the client answers "yes" to the question, describe an internal control that the client could use.
(3) Describe how you could test the internal control, including the population that you would test and the method you could use to select the sample.