Question: First Issue of Long term Debt In early May 2009 the

First Issue of Long-term Debt: In early May 2009, the 34-year old Microsoft Corp. issued its first ever long-term debt. The company took advantage of its AAA rating and low rates to issue $3.75 billion of 5-year, 10-year, and 30-year bonds. Now, for the first time ever, auditors of Microsoft Corp. must consider long-term debt during the engagement.

a. List some of the issues the auditors should address during the 2009 audit of Microsoft Corp., considering particularly that this is such a recent issue of debt and the company has no history with debt. In subsequent years, what are some of the audit issues?
b. When performing their analytical procedures on long-term debt, what are some of the common financial ratios that auditors will likely use? Since this is Microsoft’s first debt issue, what can auditors use for comparative purposes?
c. What impact is the issuance of long-term debt likely to have on Microsoft’s audit fees and duration of the audit?

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