An auditor's client has violated a minor requirement of its bond indenture that could result in the trustee requiring immediate payment of the principal amount due.The client refuses to seek a waiver from the bond trustee.Request for immediate payment is not considered likely.Under these circumstances,the auditor must
A) Require classification of bonds payable as a current liability.
B) Contact the bond trustee directly.
C) Disclose the situation in the auditor's report.
D) Obtain an opinion from the company's attorney as to the likelihood of the trustee's enforcement of the requirement.

Question

Quizplus · Accepted Answer

The auditor must disclose the situation in the auditor's report to inform the users of the financial statements of the potential risk to the company's ability to meet its obligations. This is required under Generally Accepted Auditing Standards (GAAS) and is important for the users to make informed decisions about the company's financial position. Contacting the bond trustee or obtaining an opinion from the company's attorney may provide more information about the situation, but disclosure in the auditor's report is still required. Classification of bonds payable as a current liability may be appropriate based on the specific circumstances, but it is not the best choice in this scenario where immediate payment is not likely.

An Auditor's Client Has Violated a Minor Requirement of Its