An auditor's purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence concerning management's assertions about:

Question

Quizplus · Accepted Answer

Choice "B" is correct. An auditor's purpose in reviewing the renewal of a note payable shortly after the balance sheet date most likely is to obtain evidence concerning management's assertions about understandability and classification (i.e., classification of the note as current or noncurrent). Choice "A" is incorrect. Occurrence relates to whether recorded transactions have actually occurred during the given period. Since the renewal took place subsequent to year-end, the auditor would not be concerned about how the transaction was actually recorded until the next reporting period. Choice "C" is incorrect. Completeness relates to whether all transactions occurring in the period have been recorded. Since the renewal took place subsequent to year-end, it is not relevant to the completeness assertion for the year under audit. Choice "D" is incorrect. Valuation and accuracy pertains to the fair disclosure of financial and other information at appropriate amounts. The renewal of a note payable shortly after year-end generally would not affect its valuation or its accuracy.

An Auditor's Purpose in Reviewing the Renewal of a Note