A Company Guarantees the Debt of an Affiliate

question 110

Multiple Choice

A company guarantees the debt of an affiliate. Which of the following best describes the audit procedure that would make the auditor aware of the guarantee?

• A) Review minutes and resolutions of the board of directors.
• B) Review prior year's audit files with respect to such guarantees.
• C) Review the possibility of such guarantees with the chief accountant.
• D) Review the legal letter returned by the company's outside legal counsel.

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Definitions:

Marginal Benefit

The boost in satisfaction or utility experienced by a consumer when they consume an additional unit of a specific good or service.

Total Benefit

The complete gain or advantage that an individual, entity, or society receives from consuming a good or service.

Football Games

Competitive sporting events involving two teams aiming to score points by moving a ball into the opposing team's end area, primarily through kicking, carrying, or passing.

Marginal Benefit

The extra pleasure or benefit derived from consuming an additional unit of a product or service.