A company issued bonds for cash during the year under audit. To ascertain that this transaction was properly recorded, the auditor's best course of action is to:

Question

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Tracing the cash received from the issuance to the accounting records is the best course of action because it ensures that the transaction was properly recorded in the company's books. This step also verifies the accuracy of the amount of cash received and helps the auditor detect any potential errors or fraud in the recording of the transaction. Requesting a statement from the bond trustee or confirming the issuance results with underwriters or investment bankers may provide additional information, but they do not directly confirm the recording of the transaction in the company's books. Verifying that the net cash received is credited to an account entitled "Bonds Payable" may also help in confirming the transaction, but it is not as comprehensive as tracing the cash received to the accounting records.

A Company Issued Bonds for Cash During the Year Under