An auditor's plan to examine long-term debt most likely would include steps that require:

Question

Quizplus · Accepted Answer

Choice "B" is correct. An auditor's plan to examine long-term debt most likely would include steps that require correlating interest expense recorded for the period with outstanding debt. This is an analytical procedure that would provide evidence regarding the reasonableness of the interest expense balance. Choice "A" is incorrect. This question was released prior to the issuance of FAS 107, which requires disclosure of the fair values of financial instruments. Accordingly, the auditor now needs to audit the year-end market values of long-term debt. Choice "a" is still not the best answer, however, since the auditor would not need to compare the carrying amount to the year-end market value. (Both values are shown, as FAS 107 does not require that debt securities be written down to (a lower) market value.) Choice "C" is incorrect. Generally, the existence of the holders of the debt is not verified. Choice "D" is incorrect. Inspecting the accounts payable subsidiary ledger would be included in the audit of accounts payable, not long-term debt.

An Auditor's Plan to Examine Long-Term Debt Most Likely Would