Ajax,Inc,Is an Affiliate of Borax,Inc

question 68

Multiple Choice

Ajax,Inc.,is an affiliate of Borax,Inc.and is audited by another audit firm.Which of the following is most likely to be used by the auditor of Borax to obtain assurance that all guarantees by Borax of Ajax's indebtedness have been detected?

• A) Send the standard bank confirmation request to all of Borax's lender banks.
• B) Review Borax board minutes and obtain a management representation letter.
• C) Examine supporting documents for all entries in intercompany accounts.
• D) Obtain written confirmation of indebtedness from the auditor of Ajax.

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Definitions:

Credits

Entries in accounting that increase liabilities, revenue, or equity accounts, or decrease asset or expense accounts, reflecting a gain in financial statements.

Chart of Accounts

An organized list of all accounts in a business entity's financial records, each with a unique identifier.

Journal Entry

A record in accounting that represents a transaction in the general ledger, where each transaction is recorded with both a debit and a credit.

Posting References

The notations used in accounting to link journal entries to the corresponding ledger accounts, facilitating tracking and auditing.