An experienced auditor will review the bond indenture while testing long-term obligations for which purpose?
A)To determine the fair market value of the bond and compare it to the recorded amount less a valuation allowance.
B)To ensure that a provision has not been violated that will cause the debt to become current.
C)To write disclosures for the client relating to bond terms such as interest and payments.
D)To create a confirmation that will be sent to the bond trustee for proper verification of bond value.

Question

Quizplus · Accepted Answer

When testing long-term obligations, an experienced auditor will review the bond indenture in order to ensure that no provision has been violated that will cause the debt to become current. This is a crucial step to evaluate the client's solvency and the accuracy of the financial statements.

Answer A is incorrect because determining the fair market value of the bond is not the main purpose of reviewing the bond indenture. Answer C is also incorrect because writing disclosures is not the main objective of the audit process. Answer D is incorrect because creating a confirmation is not related to reviewing the bond indenture.

An Experienced Auditor Will Review the Bond Indenture While Testing