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:

Higher Order Needs

Needs that go beyond the basic physiological requirements to include psychological and self-fulfillment needs, often associated with Maslow's hierarchy of needs.

Self-Direction

The ability or process of guiding oneself to accomplish objectives and goals based on personal judgment and motivation.

Conformity

The act of matching attitudes, beliefs, and behaviors to group norms, policies, or societal expectations.

Longitudinal Study

A research method that involves repeated observations of the same variables (e.g., people) over short or long periods of time to detect patterns, changes, and possibly predict future developments.