When auditing debt obligations, which of the following is the primary substantive analytical procedure?

Question

Quizplus · Accepted Answer

Developing an independent expectation of interest expense is a primary substantive analytical procedure when auditing debt obligations. This involves analyzing the interest rate, principal balance, and remaining term of the debt and comparing it to prior years' data and industry averages. This helps in identifying any material misstatements or inconsistencies in the financial statements. The other options, such as reading loan agreements, tracing bond proceeds to cash receipts, and confirming transactions with outside parties, are also important audit procedures but are not the primary substantive analytical procedure for auditing debt obligations.

When Auditing Debt Obligations, Which of the Following Is the Primary