The auditor can best verify a client's bond sinking fund transactions and year-end balance by

Question

Quizplus · Accepted Answer

The bond sinking fund is typically handled by a trustee responsible for holding and managing the funds set aside for bond redemption. Therefore, confirmation with the bond trustee would provide the most reliable verification of the sinking fund transactions and balance. Recomputation of interest expense, interest payable, and amortization of bond discount or premium may be useful in verifying the accuracy and completeness of the bond sinking fund transactions but may not provide direct evidence of the balance in the sinking fund. Confirmation with individual holders of retired bonds or examination and count of retired bonds would not provide complete information on the current status of the sinking fund.

The Auditor Can Best Verify a Client's Bond Sinking Fund