An Entity Has Violated a Minor Requirement of Its Bond

question 25

Multiple Choice

An entity has violated a minor requirement of its bond indenture that could result in the trustee requiring immediate payment of the principal amount due. The entity refuses to seek a waiver from the bond trustee. Request for immediate payment is not considered likely. Under these circumstances, the auditor must:

• A)require classification of bonds payable as a current liability.
• B)contact the bond trustee directly.
• C)evaluate whether there is substantial doubt about the entity's ability to continue as a going concern.
• D)obtain an opinion from the company's attorney as to the likelihood of the trustee's enforcement of the requirement.

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Definitions:

Accuracy

The degree to which a measurement, calculation, or specification conforms to the correct value or standard.

External Attribution

The process of attributing the cause of one's own or others' behavior to external factors or situations beyond one's control.

Incentives

Rewards or motivations provided to encourage specific behaviors or outcomes.

Simplify

No clear definition since "simplify" refers to the process of making something easier to understand or less complicated.