If Recorded Interest Expense Is Higher Than the Auditor's Expectation

question 54

Multiple Choice

If recorded interest expense is higher than the auditor's expectation calculated using recorded debt, all of the following are potential explanations except that:

• A)the entity failed to record debt.
• B)debt was recorded as equity.
• C)the entity used the face interest rate to calculate interest expense on a bond issued at a discount.
• D)the entity used the face interest rate to calculate interest expense on a bond issued at a premium.

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Definitions:

Sources Of Power

The origins or bases from which an individual, group, or organization derives the ability to influence others.

Referent Power

A form of personal power arising from the attraction others feel towards an individual or the desire to be like that individual.

Legitimate Power

The authority a person or position holds within an organization, recognized as rightful by its members, which allows them to influence others.

Managerial Authority

The power vested in managers to make decisions and direct subordinates within an organization.