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  3. debt covenant? = 1. company abc is your firms audi

Debt covenant? = 1. Company ABC is your firms audit client. By the end of...

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Accounting

Debt covenant? =

1. Company ABC is your firms audit client. By the end of 2016, ABC had only two outstanding 7-year bank loans, $100 million from Bank of America and $150 million from Banc of California. When your firm audits its FY2017 accounting books, there is $140 million of loan outstanding from Banc of California. As an auditor, do you still need to send loan confirmation to Bank of America? Why or why not?

2. For bank loan (or corporate bonds), audit client firms are required to disclose relevant terms, conditions, and restrictions. Please list at least three important disclosure items that should be reported in the footnotes in the annual report.

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