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 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?
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