Because there are usually few transactions in the cycle, control risk and the results of substantive tests of transactions are normally less important for designing tests of details of balances for bonds payable True or False?
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Because there are usually few transactions in the cycle, control risk and the results of substantive tests of transactions are normally less important for designing tests of details of balances for bonds payable
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- All of the following are purposes of internal risk rating systems except: Group of answer choices D. Pricing and trading of loans. B. Setting of limits and acceptance or rejection of new transactions. C. Inadequacy of loan reserves. A. Monitoring of credit quality.Which of the following statement is false about premium on bonds payable? It decreases the carrying value of the bonds It is an adjunct account It is recognized when stated rate is higher than effective rate It is recognized when cash proceeds is more than the face value of the bondsAn 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.
- Bonds with a B rating are highly speculative credit quality, meaning that there is a high level of uncertainty as to the capacity to meet financial obligations. True or FalseWhich of the following statements is correct? Credit spreads decrease with volatility Credit spreads increase with volatility Credit spreads do not depend on volatility The relation between credit spreads and volatility is nonlinear Which of the followings is not an important determinant of bond credit ratings? corporate governance risk business risk interest rate risk financial riskWhich of the following is most correct? Treasury bonds carry high default risk because government has the option not to pay its indebtedness. Corporate bonds have lower interest rates compared with treasury bonds because bonds were issued with the aid of financial intermediaries. Corporate bonds have no default risk because they are backed by their corporate assets. Treasury bonds have lower interest rates because they are assumed to carry no default risk.
- Which of the following statements is correct? Subordinated debt has less default risk than senior debt. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. A debenture is a unsecured bond. None of the statements are correct.Which failures in risk management systems have had catastrophic consequences in financial markets? Illustrate with examples(please correct and incorrect option explain) Which of the following statements is correct? Credit spreads decrease with volatility Credit spreads increase with volatility Credit spreads do not depend on volatility The relation between credit spreads and volatility is nonlinear Which of the followings is not an important determinant of bond credit ratings? corporate governance risk business risk interest rate risk financial risk
- Does governance of firms affect the prices of their bonds?Point: No. Bond prices are primarily determined by interest rate movements and therefore are not affected by the governance of firms that issue the bonds.Counter-Point: Yes. Bond prices reflect the risk of default. Firms with more effective governance may be able to reduce their default risk and thereby increase the prices of their bonds.Who is correct?Auditors and regulators are reminding firms to look closely at their accounts payable to be sure they haven’t inadvertently created debt that might alter leverage ratios and violate other loan covenants. What's the deal?which of the following risks is most closely associated with off balance sheet? trading risk liquidity risk credit risk interest rate risk
