Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 10RQ
To determine
Criticize the given quotation related to the auditing of the legality of the bonds payable.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Loan covenants are used for which of the following reasons?a. To protect the lender from the borrower’s substantially weakening of the latter’s financial position.b. To protect the borrower from the lender’s calling the loan early.c. To protect the auditors from false information by the borrower.d. To protect shareholders from management taking on too much debt.
Do some states allow creditors to engage in deception with the debtor to obtain the collateral if there has been a default? (Yes/No, deception is never allowed to be used by a creditor) Is a secured party allowed to be paid (reimbursed) for the costs of collection before it applies funds collected to the unpaid balance of a loan? (Yes/No collected funds must first be used to - pay off the debt owed to the creditor) If a debtor files for bankruptcy, does that stop any and all collection efforts of a creditor? ______ (Yes to unsecured creditors but no for secured creditors / Yes to all creditors, both secured and unsecured / No, bankruptcy does not affect a creditor's right to collection of an unpaid debt)
An auditor knew that the purpose of her audit was to render reasonable assurance on financial statements that were to be used for the application for a loan; the auditor did not know the identity of the bank that would eventually give the loan. Under the Restatement of Torts approach to liability, the auditor is generally liable to the bank which subsequently grants the loan for:
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
Knowledge Booster
Similar questions
- Which of the following is a reason that auditors consider any debt covenants? O to determine the reasonableness of debt covenants O to explain to management the purpose of the specific debt covenants O to offer suggestions as to how to avoid debt covenants O to gain a deeper understanding of which accounts are at risk of material misstatementarrow_forwardSale staff are not required to conduct suitability assessment for the sale of execution-only orders of bond and fund products. is this statement true of false? is this statement true of false?arrow_forwardWhen an auditor observes that the recorded interest expense seems to be excessive inrelation to the balance in the bonds payable account, the auditor might suspect that(1) discount on bonds payable is understated.(2) bonds payable are understated.(3) bonds payable are overstated.(4) premium on bonds payable is overstatedarrow_forward
- The purpose of a negative pledge on the borrower's assets in an unsecured bank loan agreement is toarrow_forwardAn entity has made an error in the balance sheet. During the current year, a bond has been classified as a non-current liability rather than recording it as a current liability. However, the entity will amend this error in the next financial year (Amend as a current liability). Explain how the employees/managers will impact on this error?arrow_forwardPlease answer with reason for all why the option is correct and why the other options are incorrectPlease answer correct otherwise skip it Which of the following statements about the Securities Act of 1933 is not true? A. The auditor will not be liable if he or she can demonstrate due diligence in performing the audit. B. The third-party user does not have the burden of proof that he or she relied on the financial statements. C. The third-party user does not have the burden of proof that the loss was caused by the misleading financial statements. D. The third party has the burden of proof that the auditor was either negligent or fraudulent in doing the audit.arrow_forward
- In the audit of Emerson College, the auditor's found the client's working capital to be far below the minimum stipulated in the indenture of long-term mortgage bonds payable. In addition, the College had allowed the required insurance coverage of pledged assets to lapse. These violations were sufficient to cause the bond issue to become payable on demand. If you were the auditor of Emerson College, what are the problems associated with a violation of a debt covenant? What are the potential ways around this problem, if any?arrow_forwardWhich of the following statements is incorrect? A A bank providing a loan to the entity is not a related party transaction. An entity should neither accrue nor disclose when it cosigned a mortgage note on the home of its president B guaranteeing the indebtedness in the event that the president should default. The entity considers the likelihood to default to be remote. Post-employment benefit is part of the compensation of key management personnel. An entity is not required to disclose if it has a common director with another entity.arrow_forward5. Which of the following is true of Regulation A securities? O a. They are not subject to transfer restrictions. O b. They cannot be offered publicly even with general advertising. O c. They require a lengthy and complicated registration process. O d. They may be applied for by those who have been involved in previous securities fraud cases.arrow_forward
- Which is an incorrect scenario on covenants?a. The issuing firms pursued revenue generating projects to ensure payment of the interest and theprincipal on a timely basis.b. The issuing firm disposes a mortgage on a bond to settle other creditors’ claims to prevent insolvency.c. The issuing firm submitted periodic reports to the trustee bank to fulfill the loan agreement.d. The issuing firm disposed the collateral to settle the agreement with the bondholders.e. B & Df. All of the aboveg. None of the abovearrow_forward11. Which is an incorrect scenario on covenants?a. The issuing firms pursued revenue generating projects to ensure payment of the interest and theprincipal on a timely basis.b. The issuing firm disposes a mortgage on a bond to settle other creditors’ claims to preventinsolvency.c. The issuing firm submitted periodic reports to the trustee bank to fulfill the loan agreement.d. The issuing firm disposed the collateral to settle the agreement with the bondholders.e. B & Df. All of the aboveg. None of the above 12. Statement 1: Bond issuers can take additional loans against the properties that were considered ascollaterals for the bonds.Statement 2: Bond issuers can impose the taxes paid for registering the bonds against on the interestand principal claims of the bondholders.Statement 3: Bond issuers can prioritize other claims of other creditors over the bondholders in casesof bankruptcy. Statement 4: Bond issuers can pay dividends of shareholders even though the bondholders were…arrow_forwardWhich of the following controls will most likely justify a reduced assessed level ofcontrol risk for the completeness assertion for notes payable?(1) The accounting staff reviews board of director minutes for any indication ofany transactions involving outstanding debt to make sure all borrowings areincluded in the general ledger.(2) All borrowings that exceed $500,000 require approval from the board ofdirectors before loan contracts can be finalized.(3) Before approving disbursement of principal payments on notes payable, thetreasurer reviews terms in the note.(4) Accounting maintains a detailed schedule of outstanding note payable that isreconciled monthly to the general ledger.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Business/Professional Ethics Directors/Executives...AccountingISBN:9781337485913Author:BROOKSPublisher:Cengage- Business Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Business/Professional Ethics Directors/Executives...
Accounting
ISBN:9781337485913
Author:BROOKS
Publisher:Cengage
Business Its Legal Ethical & Global Environment
Accounting
ISBN:9781305224414
Author:JENNINGS
Publisher:Cengage