The auditor can best verify an entity's bond sinking fund transactions and year-end balance by:

Question

Quizplus · Accepted Answer

The bond sinking fund is maintained by a bond trustee, who is responsible for the management of the fund and the retirement of bonds. Therefore, confirmation with the bond trustee would provide the most reliable evidence about the sinking fund transactions and year-end balance. Recomputation of interest expense, interest payable, and amortization of bond discount or premium may be relevant for verifying the accuracy of the bond interest payments, but it would not provide direct evidence about the sinking fund. Confirmation with individual holders of retired bonds or examination and count of the bonds retired during the year may be relevant for verifying the retirement of bonds but would not necessarily provide evidence about the sinking fund.

The Auditor Can Best Verify an Entity's Bond Sinking Fund