If Recorded Interest Expense Is Higher Than the Auditor's Expectation

question 46

Multiple Choice

If recorded interest expense is higher than the auditor's expectation calculated using recorded debt,all of the following are potential explanations except that

• A) The client failed to record debt.
• B) Debt was recorded as equity.
• C) The client used the face interest rate to calculate interest expense on a bond issued at a discount.
• D) The client used the face interest rate to calculate interest expense on a bond issued at a premium.

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Definitions:

Compute

To calculate or process data using a computer or mathematical methods, leading to a result or solution.

Amortize

The process of gradually paying off debt through scheduled, systematic repayments of principal and interest.

Compounded Monthly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, with the compounding occurring every month.

Monthly Payments

Monthly payments refer to amounts paid every month over a set period of time to repay a debt or subscription, often used in loans or service agreements.