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LESSON _13 - the chairperson and president is not more than...

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15-1 Although the number of transactions is smaller, each transaction is usually material, so it is normally more cost-effective to conduct substantive tests of the transactions that compose the account balance. The auditor may follow a reliance strategy for entities that engage in frequent financing activities. 15-10 Because these are accounts that are not directly affected by an accounting process, accounts which contain sensitive information or unusual transactions, or accounts for which detailed information is needed for the tax return or other schedules included with the financial statements. 15-22 Rekdahl should perform the following audit steps to determine if the company is in compliance with the bond indentures: Calculate the working capital ratio to ensure that it is 2 to 1 at the end of each month during the fiscal year. If the working capital ratio is less than 2 to 1, verify that the total compensation of
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Unformatted text preview: the chairperson and president is not more than $650,000. • Confirm with the trustee that insurance policies protecting against fire loss to the extent of 100 percent of value have been filed. • Test retained earnings to ensure that 40 percent has been restricted from dividend payments. • Confirm with the First Morgan Bank of Austin that a sinking fund has been established and that the required semiannual payments have been made. • Confirm whether any bonds have been repurchased. b. The following disclosures should be made: • The amount, interest rate, and due date of each bond issue. • The covenant restrictions on the bond indentures. • The amount of debt due over each of the next five years. 15-11 D 15-12 B 15-13 B 15-14 B 15-15 B 15-16 D 15-17 D 15-18 D 15-19 B 15-20 C...
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