The following covenants are extracted from a bond inden- ture. The indenture provides that failure to comply with its terms in any respect automatically advances the due date of the loan to the date of noncompliance (the maturity date is 20 years hence). Iden- tify the audit steps that should be taken or reporting requirements necessary in connection with each one of the following independent scenarios:

a. The debtor company shall endeavor to maintain a working

capital ratio of 2 to 1 at all times, and, in any fiscal year fol- lowing a failure to maintain the said ratio, the company shall restrict compensation of the CEO and executive officers to a total of no more than $500,000. Executive officers for this pur- pose shall include the chairman of the board of directors, the president, all vice presidents, the secretary, and the treasurer.

b. The debtor company shall insure all property that is security for this debt against loss by fire to the extent of 100% of its actual value. Insurance policies securing this protection shall be filed with the trustee.

c. The debtor company shall pay all taxes legally assessed against the property that serves as security for this debt within the time provided by law for payment without penalty and shall deposit receipted tax bills or equally acceptable evidence of payment of the same with the trustee.

d. A sinking fund shall be deposited with the trustee by semian- nual payments of $300,000, from which the trustee shall, at her discretion, purchase bonds of this issue.