“Auditors are not qualified to pass on the legality of a bond issue; this is a question for the company’s attorneys. It is therefore unnecessary for the auditors to inspect the bond indenture.” Criticize the quotation.
Answer to relevant QuestionsMansfield Corporation has outstanding an issue of 30-year bonds payable. There is no sinking fund for these bonds. Under what circumstances, if any, should this bond issue be classified as a current liability?In auditing the financial statements of Foster Company, you observe a debit entry for $200,000 labeled as Dividends in the Retained Earnings account. Explain in detail how you would verify this entry.Valley Corporation established a stock option plan for its officers and key employees this year. Because the options granted have a higher option price than the stock’s current market price, the company has not recognized ...Two assistant auditors were assigned by the auditor-in-charge to the verification of long-term liabilities. Sometime later, they reported to the auditor-in-charge that they had determined that all long-term liabilities were ...Identify three expense accounts that are verified during the audit of balance sheet accounts; also, identify the related balance sheet accounts.
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