Procedurused by an Auditor When Conducting a Subsequent Events Review

question 3

Multiple Choice

Procedurused by an auditor when conducting a subsequent events review include:

• A) assessing continued compliance with borrowing limits and loan covenants.
• B) enquiring of those charged with governance as to whether any subsequent events have occurred that may affect the financial statements.
• C) reading minutes of the meetings of the board of directors.
• D) all of the above.

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Definitions:

Interest Rate Parity

An economic theory stating that the difference in interest rates between two countries is equal to the expected change in exchange rates between their currencies.

Unbiased Forward Rates

Financial theory suggesting that forward exchange rates should be an unbiased predictor of future spot exchange rates.

Covered Interest Arbitrage

An investment strategy that involves exploiting the interest rate differential between two countries while using forward contracts to hedge against currency risk.

Eurobonds

International bonds issued in a currency not native to the country where it is issued, allowing companies to raise capital in a foreign currency.