An Entity Has Violated a Minor Requirement of Its Bond

question 45

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) Disclose the situation in the auditor's report.
• 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:

Repression

A psychological defense mechanism in which individuals unconsciously push disturbing thoughts, desires, or experiences from conscious awareness.

Motivated Forgetting

A theoretical process in which individuals may forget unwanted memories, either consciously or unconsciously, as a defense mechanism.

Psychic Mistreatment

Emotional or psychological abuse involving the use of verbal or non-verbal actions to control, isolate, or intimidate another individual.

Attributing

The process of explaining the reasons behind behaviors or events, often focusing on either internal dispositions or external situations.