Confirmations from Outside Organizations Such as Banks and Law Firms

question 5

Multiple Choice

Confirmations from outside organizations such as banks and law firms are

• A)a highly regarded and often-used type of evidence.
• B)expensive and rarely used during the audit.
• C)difficult to obtain and infrequently required.
• D)internal documents that provide low-quality evidence.

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Definitions:

Nominal Rate

Typically refers to the interest rate agreed upon in the financing agreement before any adjustment for inflation.

Inflation Rate

The rate of growth in the broad cost of goods and services, which adversely affects the power of procurement.

Real Rate

The interest rate that has been adjusted for inflation, representing the real cost of funds to the borrower and the real yield to the investor.

Coupon Rate

The annual interest rate paid by a bond issuer to the bondholders, typically expressed as a percentage of the bond's face value.