Conceptual Discussion: Audits and Loan Applications
T shirt business described at the beginning of this chapter. The owner has decided to expand her business by trying to secure a bank loan. After meeting with the bank loan officer, she asked for your help in answering several questions before proceeding with the loan application.
a. Required: What is an audit, and why would a bank require an audit before granting a loan?
b. Are audits expensive? Are they time consuming? Will an audit delay her application? Why?
c. Identify several alternative types of loans that the owner might consider.
d. The owner is considering whether to purchase and install a computer based accounting system to replace the checkbook that she has been using. What information should the owner gather?