Which of the following investments in mutual funds would not create an independence problem for auditor Gomez?
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Which of the following investments in mutual funds would not create an independence problem for auditor Gomez?
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- Dirks was an officer of a New York broker-dealer firm that specialized in providing investment analysis of insurance company securities to institutional investors. On March 6, Dirks received information from Ronald Secrist, a former officer of Equity Funding of America. Secrist alleged that the assets of Equity Funding, a diversified corporation primarily engaged in selling life insurance and mutual funds, were vastly overstated as the result of fraudulent corporate practices. Dirks decided to investigate the allegations. He visited Equity Funding’s headquarters in Los Angeles and interviewed several officers and employees of the corporation. The senior management denied any wrongdoing, but certain corporation employees corroborated the charges of fraud. Neither Dirks nor his firm owned or traded any Equity Funding stock, but throughout his investigation he openly discussed the information he had obtained with a number of clients and investors. Some of these persons sold their holdings…All of the following statements are correct, except, An investor may have significant influence even if it has 15% voting power. An investor may not have significant influence even if it has more than 20% voting power. Under the equity method that is used to account for investment in associates, cash dividends are treated as income. Share dividends do not result to a change in the total equity of the investee.Dominic Martinez has invested in something that acts like a mutual fund and that derives income from interest on loans to real estate owners. He knows there are federal laws that require this type of investment to refrain from engaging in speculative, short-term holding of real estate to sell for quick profits. What type of investment has Dominic made? a. Hybrid REIT b. Equity REIT c. Participation certificate d. Limited partnership e. Mortgage REIT
- Dave and Maria are working on the audit of a major client's financing cycle and activities. Dave's supervisor has recently apprised him that he would like Dave to check the details and amounts surrounding a recent major bond issue by the client. Dave is unsure as to how to proceed, and asks Maria for advice. Which of the following would be helpful suggestions by Maria? (Select all that apply.) O You should think about examining the minutes of previous board of directors meetings, as details of the approval should be contained in those minutes. You should plan to meet with the client's bondholders to confirm the existence of bond indentures and certificates. O The easiest thing to do would be to request written assurances from senior management pertaining to the bond issue. We can then include this document in our audit file. O You should consider auditing related interest expense accounts, as a new bond issue would have increased these.Marion was a CFP® professional who was a general partner of a hedge fund. She placed most of her clients in that hedge fund without telling them of her ownership in it. When results seemed to be disappointing, she sold her ownership and personal holdings in the fund and thereafter told her clients to get out. What SEC and CFP® violations were there? What would you recommend she do to try to rectify the situation?Cassandra Corporation, a manufacturing company, periodically invests large sums in marketable equity securities. The investment committee of the board of directors established the investment policy. The treasurer is responsible for carrying out the investment committee's directives. All securities are stored in a bank safe deposit vault. Your internal control questionnaire with respect to Cassandra's investment in equity securities contains the following three questions: Is the investment policy established by the investment committee of the board of directors? Is the treasurer solely responsible for carrying out the investment committee's directive? Are all securities stored in a bank safe deposit vault? In addition to these three questions, what questions should your internal control questionnaire include with respect to the company's investment in marketable equity securities? (Hint: Prepare questions to cover management's transaction assertions of occurrence, completeness, cutoff,…
- You participate in a private analyst briefing with the CEO of a company included in a number of Citi Vietnam’s managed fund products. They pass on some information in the briefing that has not been publicly released. What would you do with this information or how might you use it and is it inappropriate for the CEO to provide this information?John Mesa, CFA, is a portfolio manager in the Trust Department of BigBanc. Mesa has been asked to review the investment portfolios of Robert and Mary Smith, a retired couple and potential clients. Previously, the Smiths had been working with another financial advisor, WealthMax Financial Consultants (WFC). To assist Mesa, the Smiths have provided the following background information. Family: We live alone. Our only daughter and granddaughter are financially secure and independent. Health: We are both 65 years of age and in good health. Our medical costs are covered by insurance. Housing: Our house needs major renovation. The work will be completed within the next 6 months, at an estimated cost of $200,000. Expenses: Our annual after-tax living costs are expected to be $150,000 for this year and are rising with inflation, which is expected to continue at 3 percent annually. Income: In addition to income from the Gift Fund and the Family Portfolio (both described below), we…The accounting firm involved in this case wants to know if their independence will be questioned by the BOA. You have been asked to submit an analysis and conclusion. 2. Franklin Rosario is an audit manager in the Salvador & Santos accounting firm. He has just been assigned to the audit of the Starex Money Market Fund. Franklin has maintained a money market account with SMMF since it opened in 2008. All his savings, amounting to 75 percent of his total assets, are in this account, which pays the highest interest available in money market funds. However, his account constitutes only .00001 percent of the fund's assets.
- Your supervisor has asked you to research his client’s stock transaction to ensure it is treated correctly on their tax return. She has outlined two major issues she would like you to find answers for. Using the Internal Revenue Code and other valid sources, write a short memo to answer her questions. To: CPA Boss From: CPA Candidate Re: XYZ Stock Fiasco Date: April 10, 2022 Facts: Jack and Sally own 1,000 shares of XYZ stock. They originally purchased the stock on August 7, 2008, for $20/share. On March 12th they sold all 1,000 shares of XYZ for $10/share. On April 1, 2021, Jack heard that XYZ’s stock price was going to skyrocket and purchased 1,000 new shares of XYZ for $13/share. 1. Can the taxpayers claim a capital loss on the XYZ stock they sold? If so, how much may they deduct on their 2021 return? 2. What is their basis and holding period of the stock purchased?1. A company had excess funds at the beginning of 2021. The investment committee decided to purchase marketable securities, the sale and acquisition of investments were delegated to a certain company official. The best person to make periodic reviews of the investments activity would be the: The investment committee Chief operating officer Treasurer Corporate controller 2. During the auditor's risk assessment procedures, a meeting was held together with the company's management. During the meeting, management has discussed that the company recently acquired bond securities from various government agencies and publicly listed shares. In light of this, the audit senior asked the management about the company's investment policy, risk appetite and investment objectives. The audit senior's inquiry would most likely address which assertion? Rights and obligations Occurence Completeness Valuation 3. The company holds bonds. The responsibility of the collection of interest and…Which of the following factors contributes to an investor having significant influence over an investee? Question 2 options: a) Insignificant transactions occur between the investor and the investee. b) The investor owns more than 50% of the common shares outstanding of the investee. c) There is an interchange of managerial personnel between the investor and investee. d) The investor is not represented on the board of the investee.
