Question

Of the following, which is the most efficient audit procedure for verification of interest earned on bond investments?

A. Tracing interest declarations to an independent record book
B. Recomputing interest earned using the interest rate and bond amount
C. Confirming the interest rate with the issuer of the bonds
D. Vouching the receipt and deposit of interest checks

Answer 1

The most efficient audit procedure for verification of interest earned on bond investments is recomputing interest earned using the interest rate and bond amount.

Step-by-step explanation:

The most efficient audit procedure for verification of interest earned on bond investments is B. Recomputing interest earned using the interest rate and bond amount.

By recomputing the interest earned, auditors can independently verify the accuracy of the interest calculations based on the stated interest rate and bond amount. This procedure helps ensure that the amount of interest reported by the issuer is correct and matches the calculations made by the auditor.

For example, if a bond has a face value of $10,000 and an interest rate of 5%, the auditor would calculate the interest earned as $500 ($10,000 * 5%). By comparing this calculated amount with the interest reported by the issuer, the auditor can confirm its accuracy.