Question

The following are specific balance-related audit objectives applied to the audit of accounts receivable (a through i.) and management assertions about account balances (1 through 6). The list referred to in the specific balance-related audit objectives is the list of the accounts receivable from each customer at the balance sheet date, Click the icon to view the audit objectives.) Click the icon to view the management assertions.) Requirement For each specific balance-related audit objective, identify the appropriate management assertion. (Hint: See table.) Management assertion a. Specific balance-related audit objective There are no unrecorded receivables. b. Uncollectible accounts have been provided for. Receivables that have become uncollectible have been written off. d. All accounts on the list are expected to be collected within 1 year. The total of the amounts on the accounts receivable listing agrees with the general ledger balance for accounts receivable.

Answer 1

The assets listed on a bank's balance sheet might not be physically in the bank due to loans, investments, and banking regulations. In the secondary loan market, loan values fluctuate based on borrower reliability, changes in economic interest rates, and the borrower's financial state.

Step-by-step explanation:

Understanding Bank Balance Sheets and Secondary Market Loan Valuation

The money listed under assets on a bank balance sheet may not actually be in the bank due to various banking activities such as loan issuance, investments, and reserve requirements that necessitate the funds being disbursed or allocated elsewhere. Banks operate on the principle of fractional-reserve banking, meaning only a portion of the bank's deposits are kept in reserve, with the majority being used for loans and other investments.

When it comes to buying loans in the secondary market, the value you would be willing to pay for a given loan can fluctuate based on several factors:

• If the borrower has been late on a number of loan payments, this would indicate a higher risk of default, and therefore the loan would be valued less.
• Rising interest rates in the economy since the loan was made could make the loan less attractive, as newer loans would likely offer higher returns, leading to a lower valuation.
• If the borrower is a firm that has just declared high profits, this could indicate a stronger financial position and an increased ability to repay the loan, potentially increasing its value.
• In a scenario where interest rates in the economy have fallen since the bank made the loan, the existing loan becomes more valuable because it offers a higher interest rate compared to new loans being issued, thus someone might pay more for it.