In many financial statements audits, auditing financial investments involves complex tasks requiring specialized skill and knowledge. 2. a. List three audit tasks related to the audit of financial investments that may require specialized skill or knowledge. b. Define the term "financial derivative." c. List the two general purposes that a client might acquire a financial derivative.

In many financial statements audits, auditing financial investments involves complex tasks requiring specialized skill and knowledge. 2. a. List three audit tasks related to the audit of financial investments that may require specialized skill or knowledge. b. Define the term "financial derivative." c. List the two general purposes that a client might acquire a financial derivative.

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter10: Auditing Cash, Marketable Securities, And Complex Financial Instruments

Section: Chapter Questions

Problem 27RQSC

See similar textbooks

Similar questions

(a) Audit tests include tests of controls and substantive procedures. Substantive procedures canbe divided into substantive analytical procedures, tests of balances, tests of transactions andtests of disclosures.Required:For each test in the table below, select the type of audit test it represents. ( 30-50)words)Test Type of test ?1 Examine the financial report to determine whether all related party loans are properly presented 2 Recalculate depreciation figure 3 Trace sales recorded in the sales journal to shippingdocuments4 Examine sales invoices for initials to indicate that pricesand extensions have been checked5 Check cost of closing inventory to subsequent sales prices6 Confirm loan balances with financial institutions (b) You are the audit senior on the audit of Marsa Ltd, a large manufacturing company, for theyear ended 30 June 2020. It…
Audit Objectives and Procedures for Investments. In the audit of investment securities, auditors develop specific audit assertions related to the investments. They then design specific substantive procedures to obtain evidence about each of these assertions. Following is a selection of investment securities assertions:1. Investments are properly described and classified in the financial statements.2. Recorded investments represent investments actually owned at the balance-sheet date.3. Investments are properly valued at the balance-sheet date.Required:For each of these assertions, select the following audit procedure that is best suited for the audit plan. Select only one procedure for each assertion. A procedure may be selected once or not at all. a. Trace opening balances in the general ledger to prior-year audit documentation.b. Determine whether employees who are authorized to sell investments have access to cash.c. Examine supporting documents for a sample of investment…
When auditing an investment in another company, an auditor most likely would seek to conduct which audit procedure to help satisfy the valuation assertion?a. Inspect the stock certificates evidencing the investment.b. Examine the audited financial statements of the investee company.c. Review the broker’s advice or canceled check for the investment’s acquisition.
Requirement: Indicate where management assertions are being validated by the below substantive auditprocedures. Existence/Occurrence(E/O) Rights &obligations(R/O) Completeness(C) Valuation andallocation/Accuracy(V/A) Presentation& disclosure(P/D) a. Inspect securities on handand confirm securitiesheld by custodian.b. Trace serial numberindicated in the securityto the list of investmentsecurities maintained bythe client.c. The investment securitieslisted on the schedule ofinvestment transactionsof the client aremathematically accurateand agree with thegeneral ledger.d. Read minutes of meetingof board of directorsregarding investmentsused as collateral forborrowings.e. Recalculate gains andlosses on sale ofsecurities.f. Recalculate interest anddividend revenues.g. Inspect securitiessimultaneously with countof other liquid assets.h. Verify fair values ofsecurities with publishedprice quotations.i. Obtain an understandingon management’s processin classifying…
RISK-BASED AUDIT PROCESS Direction: discuss the process of auditing the following transactions/accounts:• Revenues• Rehabilitation bonds
The following are auditor's primary substantive procedures in auditing investments, except: * A. Assessing potential future investments B. Verifying existence and ownership of securities C. Investigating current and potential impairments of investments D. Reviewing appropriateness of presentation and adequacy of disclosure
Evaluating the accounting methods used and testing the valuation of securities is a primary audit objective of which assertion? * A. Existence B. Occurrence C. Completeness D. Valuation and allocation
How does PFRS 9 distinguish between the measurement methods to be used in the standard? * By reviewing the business model of each entity and the contractual cash flow characteristics of the instrument By reviewing the realisability of the instrument and risks and rewards of ownership By reviewing the realisability and the contractual cash flow characteristics of the instrument By reviewing the business model of each entity and the risks and rewards of the transaction
financ cial recor... Auditors while examining the financial records must follow:
In performing risk assessment procedures for investments, an auditor may inquire of the client personnel which of the following questions? A. Is there independent review of investments measured at fair value based on market valuation? B. Is investment income independently recalculated? C. All of the choices D. Are investment records periodically reconciled to actual listing of investments (example: per count ot investment custodian statement)?
Substantive audit procedures Existence/Occurrence(E/O) Rights &obligations(R/O) Completeness(C) Valuation andallocation/Accuracy(V/A) Presentation& disclosure(P/D) a. Inspect securities on handand confirm securitiesheld by custodian. b. Trace serial numberindicated in the securityto the list of investmentsecurities maintained bythe client c. The investment securitieslisted on the schedule ofinvestment transactionsof the client aremathematically accurateand agree with thegeneral ledger. d. Read minutes of meetingof board of directorsregarding investmentsused as collateral forborrowings. e. Recalculate gains andlosses on sale ofsecurities. f. Recalculate interest anddividend revenues. g. Inspect securitiessimultaneously with countof other liquid assets. h. Verify fair values ofsecurities with publishedprice quotations. i. Obtain an understandingon management’s processin classifying…
2. Provide examples of important audit objectives for complex financial instruments and transactions. For each audit objective that you identify, list one or more audit procedures that could be used to accomplish that objective.