Of the Following, Which Is the Most Efficient Audit Procedure

question 64

Multiple Choice

Of the following, which is the most efficient audit procedure for verification of interest earned on bond investments?

• A)Tracing interest declarations to an independent record book.
• B)Recomputing interest earned using the interest rate and bond amount.
• C)Confirming the interest rate with the issuer of the bonds.
• D)Vouching the receipt and deposit of interest checks.

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Definitions:

Liability Account

An accounting ledger showing the obligations or debts a company owes to others, representing claims against the company's assets.

Debit Portion

The section of a financial transaction that records the increase in assets or decrease in liabilities on the left side of an account.

Credit Portion

Refers to the part of a financial transaction that is recorded as a credit in the accounting records, increasing liabilities or decreasing assets.

Revenue Recognition Principle

An accounting principle that dictates the conditions under which revenue is recognized and determines how revenue is accounted for.