When auditing debt,which of the following is the primary substantive analytical procedure?
A)Reading loan agreements.
B)Developing an independent expectation of interest expense.
C)Tracing bond proceeds to cash receipts.
D)Confirming transactions with outside parties.

Question

Quizplus · Accepted Answer

Developing an independent expectation of interest expense is the primary substantive analytical procedure when auditing debt. This involves comparing the interest expense recorded in the financial statements with an expectation developed by the auditor using relevant data and economic factors. This helps the auditor determine the reasonableness of the recorded amount of interest expense and identify any potential misstatements. Reading loan agreements and confirming transactions with outside parties may also be important procedures when auditing debt, but they are not the primary substantive analytical procedure. Tracing bond proceeds to cash receipts is a relevant procedure when auditing the use of bond proceeds, but it is not a primary substantive analytical procedure when auditing debt.

When Auditing Debt,which of the Following Is the Primary Substantive