M5-Investment Cycle Flashcards
The auditor’s overall responsibility is to obtain sufficient appropriate audit evidence to provide reasonable assurance that fair value measurements and disclosures are in conformity with GAAP. (true or false)
true
After performing a count of negotiable securities, the auditor would generally obtain an acknowledgment from the client that the securities were returned intact. This helps maintain accountability for the securities, and reduces the likelihood of employee misappropriation (e.g., if a client employee were to steal a security and blame the auditor). (true or false)
true
Joint custody by two company officials over assets like cash and marketable securities helps safeguard the assets. Under joint custody, collusion is required for a defalcation to occur. (true or false)
true
The auditor would confirm the number of shares held by an independent custodian to establish the existence and ownership of a long-term investment in publicly traded securities. (true or false)
true
When an entity uses a trust company as custodian of its marketable securities, the possibility of concealing fraud would be reduced if the trust company deals only with the person reconciling the accounts, and not with the employees responsible for maintaining investment records. (true or false)
true
Investment income from dividends is generally recalculated by comparing recorded income with dividend record books produced by investment advisory services such as “Moody’s Dividend Record.” These books state the dividend that was declared and paid by the invested. (true or false)
true
Under equity method accounting, the amortization of the excess of the investor’s cost over the investment’s underlying book value reduces the investor’s income from the equity method investment. If amortization is calculated incorrectly (i.e., the amortization is too high), this could lower the return on the investment. (true or false)
true
A confirmation from an outside agent indicating that securities are being held in the client’s name provides evidence with respect to both the existence assertion and the rights and obligations assertion. (true or false)
true
Analytical review is generally used to ascertain the reasonableness of investment income in relationship to the amount invested. (true or false)
true
If the auditor is unable to count the securities at the balance sheet date the auditor should request the client to have the bank seal the safe deposit box until the auditor can count the securities. (true or false)
true
