List four examples of interest-bearing liability accounts commonly found in balance sheets. What characteristics do these liabilities have in common? How do they differ?
22-2 (OBJECTIVE 22-2) It is common practice to audit the balance in notes payable in conjunction with the audit of interest expense and interest payable. Explain the advantages of this approach.
22-3 (OBJECTIVE 22-2) Which analytical procedures are most important in verifying notes payable? Which types of misstatements can the auditor uncover by the use of these tests?
22-4 (OBJECTIVE 22-2) Why is it more important to search for unrecorded notes payablethan for unrecorded notes receivable? Suggest audit procedures that the auditor can use to uncover unrecorded notes payable.
22-5 (OBJECTIVE 22-2) What is the primary purpose of analyzing interest expense? Given this purpose, what primary considerations should the auditor keep in mind when doing the analysis?
22-6 (OBJECTIVE 22-2) Distinguish between (a) tests of controls and substantive tests of transactions and (b) tests of details of balances for liability accounts in the capital acquisition and repayment cycle.
22-7 (OBJECTIVE 22-2) List two types of restrictions long-term creditors often put on companies when granting them a loan. How can the auditor find out about these restrictions?
