Refer to the facts described in the chapter relating to the fraud case involving Adelphia Communications.
a. What assertion did Adelphia violate? Explain how Adelphia prepared financial statements that violated this management assertion.
b. Describe how the auditor could design substantive audit procedures to determine whether the amount of debt reported on the financial statements is materially misstated.
c. How are outsiders harmed when debt is not recorded on the financial statements? In such a situation, does the information received by outsiders represent the “economic reality” of the transactions? Is the information outsiders received “unbiased”? Would you like to be an outsider making decisions based on inaccurate debt information? Explain your answer.