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Accounting-SOC report

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Accounting-SOC report

Event: U.S Debt Ceiling

Synopsis. The US hit its debt ceiling of $31.381 trillion on January 19. It was the first

time the US hit its debt ceiling. The debt ceiling denotes to the entire quantity of money the

centralized government is permitted to borrow to fulfill its financial obligations as set by

Congress. The government is forced to borrow because it runs a budget deficit. As a result, the

government must therefore borrow from other money lenders to be able to pay critical bills such

as social safety funding and salaries for troops.

Hitting the debt ceiling called for strange actions from the treasury for the government to

continue meeting its obligations. As a result, it goes on to curb certain government investments

to afford to pay the bills. This condition which could run up to June, would, after that, result in

the treasury running out of cash. The condition is a cause for alarm because it is uncertain what

would happen if Congress did not extend the debt limit. It could also be a source of political

contention, which would delay the decision by Congress and lead to the United States

government defaulting on its existing loans, and the scenario would lead the world into a

financial crisis, as stated by Wall Street analysts and economists. As a result, the United States

Congress must timely work to curb the situation.

Article: The information about the US hitting its debt ceiling can be retrieved from the

New York Times. Https://www.nytimes.com/article/debt-ceiling-us-economy.html

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Companies Affected

Bondholders: Lack of money from the government would mean that the treasury lacks

any liquid cash to pay for government debts and other services. As a result, it would be forced to

default on its debts, which could plunge the global economy into a financial crisis. Defaulting in

paying its debts to the bondholders would undermine the trust of the country by bondholders

when getting loans and therefore lead to increased interest rates and higher borrowing rates.

Service providers: Lack of money by the treasury would also mean that the government

would not pay its service providers. As a result, various services, such as security by the military,

would come to a halt. Additionally, all contractors working with the government would only

provide their services if they received timely payments or a complete lack of money to pay for

the services.

The United States debt ceiling report does not qualify as a SOC report type 1 or 2. Soc

reports pertain to control and processes related to information systems and data security, while

this major event outlines the consequences that would hit the United States and the world

financial systems due to the political occurrence.

What the companies should do about their annual report.

Given that the United States has never hit its debt ceiling, the occurrence of such a scenario in

January was a cause of tension among different people. The affected companies should have a

detailed outline of how things would turn out in their annual report. There should review their

treasury bonds with the United States, and the potential consequences of hitting the debt ceiling

by the U.S. may affect their portfolios. Additionally, they should outline the potential financial

consequences while looking for alternative measures for which they could hold the government

responsible.
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Reference

Rappeport, A. (2023, February 1). What is the U.S. Debt Ceiling? Retrieved from The New York

Times: https://www.nytimes.com/article/debt-ceiling-us-economy.html