A company issued bonds for cash during the year under audit. To ascertain that this transaction was properly recorded, the auditor's best course of action is to

Question

Quizplus · Accepted Answer

Tracing the cash received from the issuance to the accounting records would provide direct evidence that the transaction was properly recorded. Requesting a statement from the bond trustee or confirming the results of the issuance with the underwriter or investment banker may provide supporting evidence, but may not provide direct evidence that the transaction was properly recorded in the company's accounting records. Verifying that the net cash received is credited to an account entitled "Bonds Payable" is also important but may not provide complete assurance that the transaction was properly recorded.

A Company Issued Bonds for Cash During the Year Under