13-26 LO 8 The auditor should review a bond indenture at the time a bond is...

Transcribed Image Text:

13-26 LO 8 The auditor should review a bond indenture at the time a bond is issued and anytime subsequent changes are made to it. a. Briefly identify the information the auditor would expect to obtain from a bond indenture. List at least five specific pieces of informa- tion that would be relevant to the audit. b. Because auditors are especially concerned with the potential understatement of liabilities, should they confirm the existence of the liability with individual bondholders? State your rationale. Assume that a company issued bonds at a discount. Explain how to compute the amount of the discount and how the auditor could determine whether the amount is properly amortized each year. C. Review Questions and Short Cases 727 d. Explain how the auditor could verify that semi-annual interest e. payments are made on the bond each year. Assume a company has a 15-year, $20 million loan that is due on September 30 of next year. It is the company's intent to refinance the bond before it is due, but it is waiting for the best time to issue new debt. Because its intent is to issue the bond next year, the company believes that the existing $20 million bond need not be classified as a current liability. What evidence should the auditor gather to determine the appropriate classification of the bond? 13-26 LO 8 The auditor should review a bond indenture at the time a bond is issued and anytime subsequent changes are made to it. a. Briefly identify the information the auditor would expect to obtain from a bond indenture. List at least five specific pieces of informa- tion that would be relevant to the audit. b. Because auditors are especially concerned with the potential understatement of liabilities, should they confirm the existence of the liability with individual bondholders? State your rationale. Assume that a company issued bonds at a discount. Explain how to compute the amount of the discount and how the auditor could determine whether the amount is properly amortized each year. C. Review Questions and Short Cases 727 d. Explain how the auditor could verify that semi-annual interest e. payments are made on the bond each year. Assume a company has a 15-year, $20 million loan that is due on September 30 of next year. It is the company's intent to refinance the bond before it is due, but it is waiting for the best time to issue new debt. Because its intent is to issue the bond next year, the company believes that the existing $20 million bond need not be classified as a current liability. What evidence should the auditor gather to determine the appropriate classification of the bond?

Answer rating: 100% (QA)

a An auditor reviewing a bond indenture would expect to obtain various information relevant to the bond issuance and repayment Five specific pieces of information that would be relevant to the audit i... View the full answer