BUS 426 Chapter Notes - Chapter 20: Promissory Note, Retained Earnings, Accrual

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 426
• Professor: Michael Favere- Marchesi

Document Summary

Nature of the capital acquisition and repayment cycle. Few transactions affect the account balances, but highly material. Exclusion of a single transaction could be material itself. There is a legal relationship between the client and the holder of the stock. There is a direct relationship between the interest and dividend accounts and debt and equity. Objectives: internal controls over notes are adequate, transactions for principal and interest are properly authorized and recorded, liability for notes and related interest expenses and liabilities are properly stated. Internal controls: proper authorization for the issue of new notes, adequate controls over the repayment of principal and interest, proper documents and records, periodic, independent verification. Tests of details of balances: completeness: existing notes payable are included, accuracy: notes payable in the schedule are accurately recorded. Chapter 20 - audit of the capital acquisition and repayment cycle: presentation and disclosure: notes payable are properly presented and disclosed.