The Auditor Should Test for the Proper Classification of Debt

question 43

True/False

The auditor should test for the proper classification of debt instruments as either trading securities, available-for-sale securities, or held-to-maturity securities in the financial statements.

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Definitions:

Capacity

The legal ability, competency, or power to enter into a contract.

Legality

The state or quality of being in accordance with the law; adherence to the law.

Simple Contract

A contract that can be either oral or written, as opposed to a formal contract which requires a special form or method of creation.

Informal Contract

An oral or written contract that is not under a seal or is not a contract of record. Also called simple contract.