You Are Auditing the Long-Term Notes Payable Account for a Client

question 60

Multiple Choice

You are auditing the long-term notes payable account for a client. Which of the following audit procedures would you most likely employ?

• A) compare interest expense recorded by the client with the notes payable account for reasonableness
• B) confirm bonds payable with individual bond holders
• C) perform analytical procedures on the bond discount or premium account
• D) examine bond documents for the presence of hybrid securities

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Definitions:

Compounded Quarterly

Compounded quarterly refers to calculating interest on the principal amount and the accumulated interest every quarter, or four times a year.

Quarterly Withdrawals

Withdrawals from an account or fund that occur four times each year, typically every three months.

Education Fund

A savings or investment account set aside for the purpose of funding educational expenses.

Compounded Semi-annually

The process of calculating interest on both the initial principal and the accumulated interest of previous periods of a deposit or loan on a twice-a-year basis.