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

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

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter13: Auditing Debt, Equity, And Long-term Liabilities Requiring Management Estimates

Section: Chapter Questions

Problem 14CYBK

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An audit team would most likely verify the interest earned on bond investments bya. Vouching the receipt and deposit of interest checks.b. Confirming the bond interest rate with the issuer of the bonds.c. Recomputing the interest earned on the basis of face amount, interest rate, and period held.d. Testing internal controls relevant to cash receipts.
explain the process of auditing the followingtransactions/accounts below. • Revenues• Rehabilitation bonds
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 obligations
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.
In 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 False
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.
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.
RISK-BASED AUDIT PROCESS Direction: discuss the process of auditing the following transactions/accounts:• Revenues• Rehabilitation bonds
n 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.
Auditing Debt and Equity The following is attached to the company's financial statements, pay attention to the non current 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?
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.
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?