Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 15, Problem 32IOQ
To determine
Identify the appropriate answer related to the examination of the long-term debt.
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An audit plan for noncurrent debt should include steps that require
a.
Inspecting the accounts payable subsidiary ledger
b.
Examining bond trust indentures.
c.
Investigating credits to the bond interest income account.
d.
Verifying the existence of the bondholders.
e.
Tracing vendor invoices to the account payable subsidiary ledger.
In the examination of interest-bearing debt, auditors identify audit objectives, and then determine appropriate procedures.
a. List the audit objectives for substantive tests of interest-bearing debt.
b. List seven substantive tests for interest-bearing debt to help the auditors meet the audit objectives.
In auditing for unrecorded long-term bonds payable, an audit team most likely willa. Perform analytical procedures on the bond premium and discount accounts.b. Examine documentation of assets purchased with bond proceeds for liens.c. Compare interest expense with the bond payable amount for reasonableness.d. Confirm the existence of individual bondholders at year-end.
Chapter 15 Solutions
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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- Which of the following audit objectives ensure that if accounts receivable is pledged as security for debt, such information should be revealed in the financial statements? a. Ownership b. Disclosure c. Occurrence d. Rights and obligationsarrow_forwardDuring the review of loan contracts and agreements, the auditor would most likely figure out the following, except: Choices Related disclosures pertaining to assets pledged as collateral. The accuracy of interest expense recorded by the entity. The existence of loans. The completeness of loans.arrow_forwardAn audit plan to examine long-term debt most likely would include steps that requirea. Comparing the carrying amount of held-to-maturity securities with their year-end market values.b. Correlating interest expense recorded for the period with outstanding debt.c. Verifying the existence of the holders of the debt by direct confirmation.d. Inspecting the accounts payable subsidiary ledger for unrecorded long-term debt.arrow_forward
- In connection with the audit of an issue of long-term bonds payable, the audit team shoulda. Determine whether bondholders are persons other than owners, directors, or officers of the company issuing the bond.b. Calculate the effective interest rate to see whether it is substantially the same as the rates charged for similar issues.c. Decide whether the bond issue was made without violating state or local laws or regulations.d. Ascertain that the client has obtained the opinion of counsel on the legality of the issue.arrow_forwardn the examination of interest-bearing debt, auditors identify audit objectives, and then determine appropriate procedures. a. List the audit objectives for substantive tests of interest-bearing debt. b. List seven substantive tests for interest-bearing debt to help the auditors meet the audit objectives.arrow_forwardexplain the process of auditing the followingtransactions/accounts below. • Revenues• Rehabilitation bondsarrow_forward
- 1. The tests of details of balances procedure to ‘foot the payables list for interest- bearing debt and agree to the general ledger’ is done to satisfy which audit objective? a. Existence. b. Detail tie-in. c. Classification. d. Cut-off.arrow_forwardAnalyze the risks associated with auditing accounts payable. Explain the process of auditing accounts payable using confirmations. Determine why third parties are important to the audit of debt and equity. How do auditors interact with third parties to gain audit evidence when auditing debt and equity? Why is it important that auditors determine if the client is complying with debt provisions?arrow_forwardWhich of the following questions would auditors most likely include on an internal control questionnaire for notes payable?a. Are assets that collateralize notes payable critically needed for the entity’s continued existence?b. Are two or more authorized signatures required on checks that repay notes payable?c. Are the proceeds from notes payable used to purchase noncurrent assets?d. Are direct borrowings on notes payable authorized by the board of directors?arrow_forward
- Auditing Debt and EquityThe following is attached to the company's financial statements, pay attention to the noncurrent liabilities and shareholders’ equity sections. Questions:a. Based on the financial statements above, explain possible “debt to equity swap” scheme carried out by the client!b. What evidence do you need to collect to ensure that the client's debt to equity swap is free from material misstatement?arrow_forwardIn the audit of loans payable, which of the following audit procedure would be most likely performed to validate the existence assertion? Group of answer choices A. Vouching of subsequent payments of loans B. Sending loan confirmations C. Performing analytical procedures D. Review loan contractsarrow_forwardRISK-BASED AUDIT PROCESS Direction: discuss the process of auditing the following transactions/accounts:• Revenues• Rehabilitation bondsarrow_forward
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