Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 22, Problem 19.1MCQ
To determine
Indicate the test which an auditor would perform for test of details for a client’s debt transactions.
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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.
Analyze the risks associated with auditing accounts payable. Explain the process of auditing accounts payable using confirmations.
Determine why third parties are important to the audit of debt and equity. How do auditors interact with third parties to gain audit evidence when auditing debt and equity? Why is it important that auditors determine if the client is complying with debt provisions?
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.
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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- 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.arrow_forwardDuring the review of loan contracts and agreements, the auditor would most likely figure out the following, except: A. The existence of loans. B. The completeness of loans. C. Related disclosures pertaining to assets pledged as collateral. D. The accuracy of interest expense recorded by the entity.arrow_forwardAn 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.arrow_forward
- If the auditor verifies a debtor’s account balance, which is comprised of a number of transactions, at the end of the financial period by sending a debtor’s confirmation request, this is an example of a Select one: A. substantive test of transactions B. test of controls C. substantive analytical procedure D. substantive test of balancesarrow_forwardHow do auditors interact with third parties to gain audit evidence when auditing debt and equity? Why is it important that auditors determine if the client is complying with debt provisions?arrow_forwardAn 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_forward
- During the audit of Albert Eistein, what relevant assertion should be used to record loans receivable net of an allowance for loan losses when allowance should adequately cover any estimated losses inherent in the loan portfolio but not excessive losses? a. Existence or occurrenceb. Valuation or allocationc. Cutoffd. Rights or obligations Among the prescribed audit activities provided below, which of the following would effectively help Metro bank determine its proper allowance for loan losses? a. Make visits to the borrower's commercial business site periodically.b. Have procedures in place to identify problem loans in a timely fashion.c. Identify any weaknesses in the institution's lending process.d. Obtain additional collateral for a loan. When assessing the reasonableness of Metro Bank's allowance for loan losses as a whole, you discovered that his estimate differs from the recorded allowance and that the difference is immaterial. How should you address this finding in your audit?…arrow_forwardIn order to make sure that loans are properly classified, the auditor would: a. Examine due dates on duplicate copies of loan agreements to determine whether all or part are a non-current liability. b. Examine the loan agreements to determine whether the company has obligations for payment. c. Trace the totals on the loans list to the general ledger. d. Examine corporate minutes for loan approval.arrow_forwardWhich 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 obligationsarrow_forward
- 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_forwardWhen auditing contingent liabilities, which of the following procedures would be MOST effective? a. Reviewing the allowance for doubtful accounts. b. Reviewing the bank cutoff statement. c. Examining customer confirmation replies. d. Examining invoices for repairs expense. e. Abstracting the minutes of the board of directors.arrow_forwardDescribe the users of audited financial statements and the decisions that they need to make based on reliable information. Please use the illustration below to help you answer this question.arrow_forward
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