The balance in the Bonds Payable account at year-end is $200,000,000. After reviewing the confirmation from the trustee, the auditors determine that the correct balance is $225,000,000. Answer the following questions regarding the bonds payable.
a. Describe two errors and two fraudulent actions that could have caused the discrepancy reported between the book value and the confirmed value.
b. What audit evidence would you gather to determine whether the specific errors and fraudulent actions that you suggested caused the misstatements?
c. How will the bonds payable appear on the company’s financial statements?
What disclosures related to bonds are needed?