A company issued long-term notes payable 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

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The best course of action for the auditor to verify the issuance of long-term notes payable is to trace the cash received from the issuance to the accounting records. This will ensure that the cash received has been properly recorded in the company's books, and any errors or discrepancies can be identified and corrected. Confiming with the underwriter or investment banker may provide additional information, but it does not verify that the transaction was properly recorded. Verifying that the new cash received is credited to an account entitled "Bonds Payable" and requesting a statement from the bond trustee may be relevant, but they do not ensure that the transaction was properly recorded.

A Company Issued Long-Term Notes Payable for Cash During the Year