An audit team would most likely verify the interest earned on bond investments by:
A)vouching the receipt and deposit of interest checks.
B)confirming the bond interest rate with the issuer of the bonds.
C)recomputing the interest earned on the basis of face amount, interest rate, and period held.
D)testing internal controls relevant to cash receipts.

Question

Quizplus · Accepted Answer

To verify the interest earned on bond investments, the audit team would typically recomputed the interest earned based on the face amount of the bond, the interest rate, and the period held. This involves performing a mathematical calculation to confirm that the amount of interest recorded in the financial statements is accurate. Vouching the receipt and deposit of interest checks and testing internal controls relevant to cash receipts are not necessary methods for verifying bond interest earned. While it may be helpful to confirm the bond interest rate with the issuer, this alone would not provide sufficient evidence to verify the accuracy of the interest earned recorded in the financial statements.

An Audit Team Would Most Likely Verify the Interest Earned