How can you best manage this area of an audit

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Question - The text discussion on Debt and Equity impresses the importance and high risk in this area of an audit. While the frequency of misstatements may be low, the amount is generally high or very high.  Even in the Enron debacle, the relationship with its SPEs was known, but the audit procedures and financial disclosure were inadequate.

The text continues with a discussion on client compliance or non-compliance with covenants and other documents.  How does the auditor know which documents to review? What if the disclosure of non-compliance with a debt covenant is not made by the client?

As an auditor, how can you best manage this area of an audit?

Reference no: EM132912472

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