The following long-term debt documentation (indexed K-1) was prepared by client personnel and audited by AA, an
Question:
The following long-term debt documentation (indexed K-1) was prepared by client personnel and audited by AA, an audit assistant, during the calendar year 2011 audit of American Widgets, Inc., a continuing audit client. The engagement supervisor is thoroughly reviewing the working papers.
Overall Conclusions
Long-term debt, accrued interest payable, and interest expense are correct and complete at 12/31/11.
Required
Identify the deficiencies in the audit documentation (shown next) that the engagement supervisor should discover.
Transcribed Image Text:
Long-term Debt December 31, 2011 Date Preparedby M Approved by 2/10/12 Ac crued December 31, 2010 Borrowings Reductions 31 20119 2011 2011 Rate Payment Terms Paid to Lender Collateral 31, 2011 Comments 12% 50,000 车300.00。 250,000. îteestoniy on 25th of mornth, principal due in ful 1/1/15, no pre payment penalty 宰 $100,000S 6/30/11 12/25/11 2,500** Diedend of $80,000 pad 9/2/119 WP N violates a provision of the debt agreement, which thereby pernts lender to demand immedate payment; ender has refused to waive this voaton her tres 100,00 50,000 200,000 12/31/11 Prme Interest ony on last 2nd morage plus 1 day ofmonith, principal on Park St. Prime was 8% to 9% Lenders Capital Corp. during the year due in full 3/5/15 building 5,642 Reclassification entry for current poton Gigartic Building & Loan Assoc. 12% 12/5/11 $5,000 mcpal plus nterest due on 5th of marith, due in ful 12/31/12 1st morgage on Park St 880,000 proposed (See RJE-3) J, Lot, Due in fu 12/31/12 200,000f Borowed additional $100,000 from J. Lot on 1/7/10 s1,170,000 $350,000 $260.000 1,310,000 T/B Readded, scoad Contemed without excepson, W/P K-2 Int.reat easta ฏ0m lom-arm debt Intees expme for year Avenigr loun balnce oustanding Fiveyez maurities for diadosur papoa) 281,333 $1,406,667ss Il Confirmed wiah excepson, W/P K-3 Does nke correcaly Yar-end 12/3112 $ 60,000 260,000 Traced to working rid blnce t Agred to 12/31/10 working papers 1231/1 Agreed in tret cam, and colleeral to oogy of noe and kan agemen S Agreed to cancelad dhak and board of dincos sahoriason, WP w-7
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The document contains the following deficiencies 1 The subject matter of the working paper and clien...View the full answer
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Related Book For
Auditing A Business Risk Approach
ISBN: 978-0538476232
8th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
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