Question
Cassie Campbell, CPA, is performing an audit for one of her clients, J-Yoga, a yoga studio chain, for its December 31, 2020, year end. The
Cassie Campbell, CPA, is performing an audit for one of her clients, J-Yoga, a yoga studio chain, for its December 31, 2020, year end. The audit program requires a substantive analytical procedure to be performed on the reasonableness of J-Yoga's interest expense on its long-term debt. Cassie has identified the following information: Long-term debt balance confirmed by the bank in prior-year file $745,861 Long-term debt balance confirmed by the bank in the current year $527,529 Interest rate per the bank confirmation 5.75% Interest Expense Balance per the general ledger $34,525 Performance materiality $5,000 Using the information provided by Cassie, please perform the following: a)Assess the reliability of the data provided by Cassie. b)Using the average loan balance, prepare a working paper calculating the expected interest expense. Compare this to the amount recorded by the client in the general ledger and make a conclusion. c)What level of evidence does this test provide?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started