A lease should be classified as a finance lease by a lessee if it transfers substantially all of the risks and rewards of ownership. A lease is classified at its inception. It normally is classified as a finance lease if, for example,1) the lease provides for the transfer of ownership of the leased asset by the end of the lease term;2) the lease contains a bargain purchase option, i.e., the lessee has the option to purchase at a price expected to be sufficiently below the fair value of the exercise date that, at the lease's inception, exercise is reasonably certain;3) the lease term is for the major part of the economic life of the leased asset;4) the present value of the minimum lease payments is at least substantially all of the fair value of the leased asset at the inception of the lease; or5) the leased asset is such that it can be used only by the lessee without major modification_ Lease A a finance lease because the terms of the lease include a bargain purchase option. Lease C passes the economic life test, and lease D passes the recovery of investment test.

The TIE ratio is a leverage ratio_ It emphasizes the ability to pay interest expense. The ratio equals profit before interest and taxes divided by interest

RST Corporation's Income Statement for Year 5 and Year 6


The market value of RST's ordinary stock at the end of Year 6 was US $100.00 per share.

Unauthorized access to money transfer activities or data is an inherent and unique risk of EFT systems. An unauthorized person may attempt to read, alter, or delete information in data files or to enter authorized fund transfers. Hence, in the financial services industry, protection of confidential customer transactions is especially important. Moreover, unauthorized transfers subject a financial institution to a direct risk of serious loss.

To determine if ex-employees are accessing the company's computer systems, the auditor should obtain the log showing system access. This log should be compared with current payroll lists to see if anyone not on the payroll is still accessing or is able to access the systems.