In Connection with the Audit of an Issue of Long-Term

question 91

Multiple Choice

In connection with the audit of an issue of long-term bonds payable, the audit team should:

• A)determine whether bondholders are persons other than owners, directors, or officers of the company issuing the bond.
• B)calculate the effective interest rate to see if it is substantially the same as the rates for similar issues.
• C)decide whether the bond issue was made without violating state or local law.
• D)ascertain that the client has obtained the opinion of counsel on the legality of the issue.

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Definitions:

Fischer Esterification

A chemical reaction between an alcohol and carboxylic acid in the presence of an acid catalyst to produce an ester and water.

Ester Formation

A chemical reaction process where carboxylic acids react with alcohols in the presence of acid catalysts to form an ester and water.

Butanal

An aldehyde with the formula C4H8O, characterized by having a carbonyl group at the end of a four-carbon chain.

Butanoic Acid

A saturated four-carbon fatty acid with a carboxylic acid functional group; known for its unpleasant smell.