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

The audit team would most likely verify the interest earned on bond investments by recomputing the interest earned based on the face amount, interest rate, and period held. This is because the interest on bonds is typically determined by these factors and can be easily calculated based on them. Vouching the receipt and deposit of interest checks or testing internal controls relevant to cash receipts may be relevant for verifying interest earned on other types of investments, but not for bond investments specifically. Confirming the bond interest rate with the issuer of the bonds may be helpful in understanding the terms of the investment, but would not necessarily verify the interest actually earned on the investment.

An Audit Team Would Most Likely Verify the Interest Earned