5.1 Review Questions
Michelle Clute

13-33. Relevant accounts when auditing debt obligations are:
Bonds Payable
Interest Expense
Gains or losses on refinancing debt
Notes Payable
Mortgages payable
The over all objective of the audit of debt obligations is to determine whether all obligations are recorded and properly classified and disclosed. The auditor is primarily concerned with understatement and, therefore, focuses on the completeness assertion.

13-34. Relevant accounts when auditing stockholder’s equity include:
Stock accounts (common, preferred, and treasury)
Additional paid-in capital
Dividends accounts
Retained earnings

13-41. Controls that the auditor would expect an organization to have in place in regards to debt obligations are:
1. The board of directors approves all new debt.
2. Debt and interest accounts are updated and reconciled to the general ledger on a monthly basis.
3. Top management and the board of directors review draft financial statements prior to issuance for proper disclosure of debt obligations.

13-42. Controls that the auditor would expect an organization to have in place in regards to stockholder’s equity are:
1. The board of directors approves all stock transactions (including options and warrants)
2. The CEO and CFO authorize all stock transactions (including options and warrants) approved by the board of directors.
3. Stockholder’s equity accounts are updated and reconciled to the general ledger on a timely basis.

13-50. Relevant Management Assertions and their typical Substantive Prodedures are as follows:
1. Management Assertion: Completeness (recorded debt obligations include all debt obligations).
Substantive Procedures: (a) Perform substantive analytical procedures, (b) Confirm debt obligations,