Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 22, Problem 21DQP
(a).
To determine
Determine the purpose of
(b).
To determine
Determine the provisions for bond indenture agreement for which the auditor should be alert.
(c).
To determine
Determine the ways which can be used by the auditor to identify the terms for provisions has been met.
(d).
To determine
Determine how unamortized bond discount or premium should be verified by the auditor.
(e).
To determine
Determine the list of information that should be requested in the confirmation of bonds payable with the bondholder.
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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 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.
An 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.
Chapter 22 Solutions
Auditing And Assurance Services
Ch. 22 - List four examples of interest-bearing liability...Ch. 22 - Prob. 2RQCh. 22 - Prob. 3RQCh. 22 - Prob. 4RQCh. 22 - Prob. 5RQCh. 22 - Distinguish between (a) tests of controls and...Ch. 22 - Prob. 7RQCh. 22 - Prob. 8RQCh. 22 - Prob. 9RQCh. 22 - Prob. 10RQ
Ch. 22 - Prob. 11RQCh. 22 - Prob. 12RQCh. 22 - Prob. 13RQCh. 22 - Prob. 14RQCh. 22 - Prob. 15RQCh. 22 - Explain the relationship between the audit of...Ch. 22 - Prob. 17.1MCQCh. 22 - Prob. 17.2MCQCh. 22 - Prob. 17.3MCQCh. 22 - Prob. 18.1MCQCh. 22 - Prob. 18.2MCQCh. 22 - Prob. 18.3MCQCh. 22 - Prob. 19.1MCQCh. 22 - Prob. 19.2MCQCh. 22 - Prob. 19.3MCQCh. 22 - Prob. 20DQPCh. 22 - Prob. 21DQPCh. 22 - Prob. 22DQPCh. 22 - Prob. 23DQPCh. 22 - Prob. 24DQPCh. 22 - Prob. 25DQPCh. 22 - Prob. 26DQPCh. 22 - Prob. 27DQPCh. 22 - Prob. 28DQPCh. 22 - Prob. 29DQPCh. 22 - Prob. 30DQP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- To determine that all transactions relating to long-term debts are properly recorded, the auditor would most likely *a. Trace authorization for issuance of debt to credits to the long-term debt accountb. Recalculate interest expense and amortization of premium or discount, if any.c. Ascertain the amount of long term debt maturing within one yeard. Review minutes of BOD meetingsarrow_forwardThe audit step most likely to reveal the existence of contingent liabilities is(1) a review of vouchers paid during the month following the year-end.(2) mortgage-note confirmation.(3) accounts payable confirmations.(4) an inquiry directed to legal counsel.arrow_forwardIn the audit of bond investments classified as FA @ amortized cost, the auditor must consider that the interest recognized by the client are those interest received in cash plus accrued interest based on the face amount of the bond investments. Select one: True Falsearrow_forward
- For each of the following items, specify whether the information would most likely be found on the balance sheet, the income statement, the statement of cash flows, or in the notes to the statements. 1. The amount of a bond liability. 2. A description of any bond covenants. 3. The coupon rates associated with bond issuances. 4. Interest expense for the period. 5. The maturity dates associated with bond issuances. 6. Cash interest paid for the period. Locationarrow_forwardDetermine the following as a result of your audit: a. How much is the correct carrying value of the notes payable as of December 31, 2023? b. How much is the correct interest expense for the year ended December 31, 2023? c. How much of the notes payable is reported in the current liabilities section of the statement of financial position as of December 31, 2023? please show solution.arrow_forwardBond Indenture Covenants. The following covenants are extracted from the indenture of a bond issue. The indenture provides that failure to comply with its terms in any respect automatically advances the due date of the loan to the date of noncompliance (the stated date is 20 years hence).Give any audit steps or reporting requirements you believe shouldbe taken or recognized in connection with each of the following:1. “The debtor company shall endeavor to maintain a working capital ratio of 2:1 at all times and, in any fiscal year following a failure to maintain said ratio, the company shall restrict compensation of officers to a total of $500,000. Officers for this purpose shall include the board chair, president, all vice presidents, secretary, and treasurer.”2. “The debtor company shall keep all property that is security for this debt insured against loss by fire to the extent of 100 percent of its actual value. Policies of insurance comprising this protection shall be filed with the…arrow_forward
- Which of the following audit procedures is least effective for detecting unrecorded long-term debt at the balance sheet date? Question options: Confirming long-term debt. Confirming cash. Testing cash disbursements in the subsequent year. Analyzing the ratio of current interest expense to average long-term debt.arrow_forwardUse the incremental method to record the issuance of the bonds and warrants.arrow_forwardThe printing costs and legal fees associated with the issuance of bonds should Select one: a. be expensed when incurred. O b. be reported as a deduction from the face amount of bonds payable. c. not be reported as an expense until the period the bonds mature or are retired. d. be recorded as a reduction of the bond issue amount and then amortized over the life of the bonds.arrow_forward
- A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the auditors are unable to count securities at the balance sheet date, they most likely willa. Request the bank to confirm to the auditors the contents of the safe deposit box at the balance-sheet date.b. Examine supporting evidence for transactions occurring during the year. c. Count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance-sheet date.d. Request the client to have the bank seal the safe deposit box until the auditors can count the securities at a subsequent date.arrow_forwardDetermine the following as a result of your audit: a. How much of the notes payable is reported in the non-current liabilities section of the statement of financial position as of December 31, 2023? b. How much is the correct interest expense for the year ended December 31, 2024? show solution:arrow_forwardAssume you are working in public accounting and the client you are assisting has a question on the appropriate guidance regarding the how to determine the number of periods to amortize a bond discount. What section in the codification would be appropriate to search for guidance on this issue? Question 22 options: a) Initial Measurement b) Subsequent Measurement c) Recognition d) Other Presentation Mattersarrow_forward
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