Reference no: EM132577651

Lina Zhang, CPA, is performing an audit for one of her clients, Le Marche, a coffee chain, for its December 31, 2020, yearend. The audit program requires a substantive analytical procedure to be performed on the reasonableness of Le Marche's interest expense on its long-term debt.

Long-term debt balance confirmed by the bank in prior-year file 12/31/2019 $ 620,000

Long-term debt balance confirmed by the bank in the current year 12/31/2020 $ 457,530

Interest rate per the bank confirmation 4.75%

Interest Expense Balance per the general ledger $ 34,525

Performance materiality $ 5,000

Using the information provided by Lina, please perform the following:

Question a) Assess the reliability of the data provided by Lina.

Question b) Using the average loan balance, make a working paper calculating the expected interest expense. Compare this to the amount recorded by the client in the general ledger and make a conclusion. Show your calculations

Question c) Base on the result of this SAP, should Lina perform additional substantive procedures? state your reason.