An Auditor's Substantive Analytical Procedure Provides the Auditor with an Interest

question 6

Multiple Choice

An auditor's substantive analytical procedure provides the auditor with an interest expense amount that is significantly higher than the client's recorded interest expense. This finding would most likely lead the auditor to conclude that:

• A) client has not recorded all long-term interest bearing debt in the accounting records.
• B) client has not recorded all interest expense paid or accrued.
• C) client has not properly accounting for the discount of bonds payable account.
• D) client has not properly recorded interest income.

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Definitions:

Interest

The price paid for the opportunity to use borrowed finances, generally expressed through an annual percentage.

Simple Interest

Interest calculated only on the principal amount, or on that part of the principal amount which remains unpaid.

Principal

The principal refers to the initial amount of money lent or invested, excluding any interest or growth.

Annual Rate

The interest rate for a period of one year, often used as a benchmark for savings or loan interest calculations.