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Lecture Principles of auditing and other assurance services (15/e) - Chapter 15: Debt and equity capital. The details of the audit of long-term debt and equity accounts were discussed in this chapter. The chapter includes a description of the controls for these types of accounts, and the audit procedures that the auditors use to substantiate long-term debt and equity accounts. | Debt and Equity Capital Chapter 15 1 Internal Control Over Interest-- Bearing Debt Authorization by the board of directors Use of an independent trustee Interest Payments on Bonds and Notes Payable--Cash disbursement controls 15- 2 2 Objectives for the Audit of Interest-Bearing Debt Consider inherent risks, including fraud risks. Consider internal control over interest-bearing debt. Determine the existence of recorded interest-bearing debt. Establish the completeness of recorded interest- bearing debt. Determine that the client has obligations to pay the recorded interest-bearing debt. Determine that the valuation of interest-bearing debt is in accordance with generally accepted accounting principles. Determine that the presentation and disclosure of interest-bearing debt are appropriate. 15- Substantive Tests of Interest- Bearing Debt Obtain analyses of interest-bearing debt and related accounts Examine copies of notes payable and supporting documents Confirm . | Debt and Equity Capital Chapter 15 1 Internal Control Over Interest-- Bearing Debt Authorization by the board of directors Use of an independent trustee Interest Payments on Bonds and Notes Payable--Cash disbursement controls 15- 2 2 Objectives for the Audit of Interest-Bearing Debt Consider inherent risks, including fraud risks. Consider internal control over interest-bearing debt. Determine the existence of recorded interest-bearing debt. Establish the completeness of recorded interest- bearing debt. Determine that the client has obligations to pay the recorded interest-bearing debt. Determine that the valuation of interest-bearing debt is in accordance with generally accepted accounting principles. Determine that the presentation and disclosure of interest-bearing debt are appropriate. 15- Substantive Tests of Interest- Bearing Debt Obtain analyses of interest-bearing debt and related accounts Examine copies of notes payable and supporting documents Confirm interest-bearing debt Vouch borrowing and repayment transactions Perform analytical procedures Test computations of interest expense, interest payable, and amortization of discount and premium Evaluate compliance with debt provisions Verify authority for issuance of debt to corporate minutes Review notes payable paid or renewed after the balance sheet date Perform procedures to identify notes payable to related parties Send confirmation letters about financing arrangements Evaluate financial statement presentation and disclosure 15- 3 3 Objectives for the Audit of Interest-Bearing Debt Consider inherent risks, including fraud risks. Consider internal control over owners’ equity. Determine the existence of recorded owners’ equity. Establish the completeness of recorded owners’ equity. Determine that the valuation of owners’ equity is in accordance with generally accepted accounting principles. Determine that the presentation and disclosure of owners’ equity are appropriate. 15- Internal .
