The auditor should test for the proper classification of debt instruments as either trading securities, available-for-sale securities, or held-to-maturity securities in the financial statements.

Question

Quizplus · Accepted Answer

The proper classification of debt instruments is important for accurate financial reporting, and the auditor should test for it. Trading securities are held for short-term profit, available-for-sale securities are held for longer-term investment, and held-to-maturity securities are held until maturity. Ensuring the correct classification is important because it affects how the investments are valued and reported in the financial statements.

The Auditor Should Test for the Proper Classification of Debt