The following multiple-choice questions concern interest-bearing liabilities. Choose the best response.

a. The auditor's program for the examination of long-term debt should include steps that require the

(1) examination of any bond trust indenture.

(2) inspection of the accounts payable master file.

(3) verification of the existence of the bondholders.

(4) investigation of credits to the bond interest income account.

b. During the year under audit, a company has completed a private placement of a substantial number of bonds. Which of the following is the most important step in the auditor's examination of bonds payable?

(1) Examining the bond records maintained by the transfer agent.

(2) Confirming the amount issued with the bond trustee.

(3) Tracing the cash received from the issue to the accounting records.

(4) Recomputing the annual interest cost and the effective yield.

c. Several years ago, Conway, Inc., secured a conventional real estate mortgage loan. Which of the following audit procedures would most likely be performed by an audi¬ tor examining the mortgage balance?

(1) Recomputing mortgage interest expense.

(2) Examining the current year's cancelled cheques.

(3) Reviewing the mortgage amortization schedule.
(4) Inspecting public records of registered mortgages.