The Audit Objective to Determine That Existing Loans Payable Are

question 112

Multiple Choice

The audit objective to determine that existing loans payable are included in the loans payable schedule (completeness) is accomplished by the following test of balances procedure:

• A) Examine duplicate copies of loan agreements for principal and interest rates.
• B) Trace the individual loans payable on the schedule to the master file.
• C) Review the bank reconciliation for new loans credited directly to the bank account by the bank.
• D) Review loans to determine whether any are related- party loans or accounts payable.

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Definitions:

Drawer

The party that writes an order, or the person who writes a check.

Payee

The party that receives the benefit of an order (check, etc.).

Drawee

The party that must obey an order. In the context of banking, the drawee is the bank that must pay the funds ordered by a customer’s check.

Regulation E

A provision of the Electronic Fund Transfer Act that outlines rules for electronic payments, including transfers via ATM, debit card, and other direct transfers.