One of the Reasons the Auditor Reads Debt Agreements Is

question 29

Multiple Choice

One of the reasons the auditor reads debt agreements is to discover whether there are any restrictions on the company,such as restrictions on the payment of dividends.It is important for the auditor to identify such restrictions so that

• A)corroborative evidence can then be obtained from management.
• B)the auditor can make sure that management is adhering to the restrictions.
• C)the auditor can include the restrictions in the management representation letter.
• D)they can be disclosed in the footnotes of the financial statements.

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Definitions:

State And Local Taxes

Various forms of taxation imposed by state, regional, and local governments, including income, sales, property, and other taxes.

Progressive

A tax system in which the tax rate increases as the taxable amount increases, often aimed at reducing income inequality.

Payroll Taxes

Contributions required from employers and their workers, determined as a portion of the payroll expenses incurred by the employer.