During the course of an audit, a CPA observes that the recorded interest expense seems to be excessive in relation to the balance in the long-term debt account. This observation could lead the auditor to suspect that
A) long-term debt is understated.
B) discount on bonds payable is overstated.
C) long-term debt is overstated.
D) premium on bonds payable is understated.

Question

Quizplus · Accepted Answer

If the interest expense is excessive compared to the balance in the long-term debt account, it could indicate that not all debt is being reported on the balance sheet, suggesting that long-term debt might be understated.

During the Course of an Audit, a CPA Observes That