AUDITING & ASSURANCE SERVICES CONNECT AC
10th Edition
ISBN: 9781259292057
Author: MESSIER
Publisher: MCG
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Chapter 15, Problem 15.14MCQ
To determine
Concept Introduction:
Bond sinking fund is established to repurchase a portion of outstanding bonds each year,bond transactions are usually done by bond trustee. So, auditor can best verify the entity bond fund transactions and year end balance by confirmation with Bond trustee.
To choose: The correct statement concerning the statistical sampling in tests of controls.
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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.
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.
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 meetings
Chapter 15 Solutions
AUDITING & ASSURANCE SERVICES CONNECT AC
Ch. 15 - Prob. 15.1RQCh. 15 - Prob. 15.2RQCh. 15 - Prob. 15.3RQCh. 15 - Prob. 15.4RQCh. 15 - Prob. 15.5RQCh. 15 - Prob. 15.6RQCh. 15 - Prob. 15.7RQCh. 15 - Prob. 15.8RQCh. 15 - Prob. 15.9RQCh. 15 - Prob. 15.10RQ
Ch. 15 - Prob. 15.11MCQCh. 15 - Prob. 15.12MCQCh. 15 - Prob. 15.13MCQCh. 15 - Prob. 15.14MCQCh. 15 - Prob. 15.15MCQCh. 15 - Prob. 15.16MCQCh. 15 - Prob. 15.17MCQCh. 15 - Prob. 15.18MCQCh. 15 - Prob. 15.19MCQCh. 15 - Prob. 15.20MCQCh. 15 - Prob. 15.21PCh. 15 - Prob. 15.22PCh. 15 - Prob. 15.23PCh. 15 - Prob. 15.24P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- 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.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_forwardWhich of the following statements concerning bonds is not a true statement? The bond indenture is prepared after the bonds are printed. Bonds are generally sold through an investment company. The bond indenture and bond certificate are separate documents. The trustee keeps records of each bondholder.arrow_forward
- Bond issue costs, such as printing fees, legal fees, commissions, etc. are most appropriately accounted for by a. charging them to an expense account in the year the bonds are actually sold. b. debiting them to unamortized bond issue costs, setting them as a deferred charge on the statement of financial position, and amortizing them in a manner similar to bond discount over the life of the bond. c. charging them to an expense account in the year the bonds are originally dated whether or not they are sold in that year. d. considering them in the measurement of the bonds payable.arrow_forwardIn terms of public offerings of bonds, what is an indenture? A) a list of the duties of a trust company representing the bondholders' interests B) a memorandum that must be produced to describe the details of a bond offering C) a formal contract that specifies a firm's obligations to the bondholders D) a schedule of the fees charged by an underwriting companyarrow_forwardFor 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_forward
- Assume 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_forwardFor 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.arrow_forward2. The printing costs and accounting/legal fees associated with the issuance of bonds should: (A) Be expensed when incurred. (B) Be reported as a deduction from the face amount of the bonds payable on the balance sheet. (C) Be accumulated in a deferred charge account (unamortized asset) and amortized to expense over the life of the bonds. (D) Be recorded as an expense all in the year the bonds mature or are retired. (E) None of the above.arrow_forward
- 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.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_forwardTerm bonds are a.bonds that give the issuing corporation the option of calling the bonds for redemption before the maturity date. b.bonds that give the holder the option of exchanging the bonds for capital stock of the corporation. c.bonds issued in a series so that a specified amount of the bonds matures each year. d.bonds that all have the same maturity date.arrow_forward
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