In the Audit of Notes Payable,an Auditor Testing the ASB

question 44

Multiple Choice

In the audit of notes payable,an auditor testing the ASB balance assertion of accuracy and valuation most likely would

• A) Read directors' and finance committee's minutes for authorization of financing transactions.
• B) Select a sample of paid notes and trace interest expense to the general ledger account.
• C) Select a sample of paid notes and recalculate interest expense for the period under audit.
• D) Select a sample of notes payable and vouch cash receipt to the bank statement.

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Definitions:

Product Cost

The expenses incurred to create a product, including direct materials, direct labor, and manufacturing overhead.

Direct Materials

Raw materials that can be directly traced to the manufacturing of a product.

Period Cost

Costs that are expensed in the period in which they are incurred, as opposed to being capitalized or included in the cost of goods sold.

Depreciation

The systematic allocation of the cost of a tangible asset over its useful life, reflecting the decrease in value due to wear, tear, or obsolescence.