Which of the Following Would the Auditor Consider as Part

question 41

Multiple Choice

Which of the following would the auditor consider as part of the control environment related to debt obligations?

• A) Inquiry of trustee regarding the registration of current bondholders and distribution of interest payments.
• B) Recalculation of the underwriter's commission.
• C) Independence of the board of directors with respect to long-term financing.
• D) Inspection of documentation to confirm refinancing of debt.

---

Definitions:

Perfectly Competitive

A perfectly competitive market is an economic theory of a market where all participants are price-takers, and goods are completely homogeneous, ensuring no single buyer or seller has market power.

Economic Profits

The financial gains that are realized when total revenues exceed total costs, including both explicit and implicit costs.

Accounting Profits

The net earnings of a company as calculated by subtracting all explicit costs from total revenues, according to standard accounting practices.

Fixed Costs

Costs that do not vary with the level of output or production, such as rent or salaries.