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CMA Intermediate · Corporate Accounting and Auditing · Audit of Various Items of Financial Statements

During audit of Beta Ltd, the auditor notes that the company has taken a term loan from a bank secured by a charge on its land. Which audit step is most relevant to confirm completeness and accuracy of the charge disclosure?

The auditor should verify the register of charges and the charge filings with the Registrar of Companies and get direct confirmation from the lender about balance and security. Checking sales receipts, salary registers or inventory sheets does not address completeness or accuracy of charge disclosures.

  1. AVerify the register of charges and the charge filings with the Registrar, and obtain direct confirmation from the lenderCorrect
  2. BCheck the cash book for the dates of sales receipts
  3. CVouch the salary register for the month of March
  4. DExamine the inventory count sheets

Explanation

For secured borrowings the auditor checks the loan agreement, the register of charges, the filing of charge particulars with the Registrar, and obtains direct balance and security confirmation from the lender. The other procedures address unrelated areas.

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