A Company Issued Bonds for Cash During the Year Under

question 47

Multiple Choice

A company issued bonds for cash during the year under audit. To ascertain that this transaction was properly recorded, the auditor's best course of action is to:

• A)request a statement from the bond trustee as to the amount of the bonds issued and outstanding.
• B)confirm the results of the issuance with the underwriter or investment banker.
• C)trace the cash received from the issuance to the accounting records.
• D)verify that the net cash received is credited to an account entitled "Bonds Payable."

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Definitions:

Increase Side

Typically refers to the side of an account (debit or credit) used to record increases in that account, varying by the type of account.

Normal Balance

The side (debit or credit) of an account that is expected to have a higher balance, considering the account type (asset, liability, etc.).

Double-Entry Accounting

A bookkeeping system that records each transaction in two accounts, ensuring that the accounting equation (Assets = Liabilities + Equity) remains balanced.

Transaction Recorded Twice

This refers to a bookkeeping error where a financial transaction is mistakenly entered into an accounting system more than once, potentially distorting financial statements.