Ch 10- Cash 4
bonded
A questionnaire used by the auditors in assessing controls relating to financial investments will include questions such as the following: Are all persons having access to securities properly ___________?
presentation
Evaluate financial statement presentation and disclosure of financial investments. Which primary audit objectives?
valuation and presentation
Evaluate methods used and obtain evidence about proper valuation. Which primary audit objectives?
processes and controls
Example of test of controls: If estimates must be used to develop further estimates of the fair value of investments, perform tests of the ________ and __________ for developing the estimates.
revise
Example of test of controls: If necessary, _________ the risk of material misstatements based on the results of tests of controls.
periodic inspection derivative
Example of test of controls: Inspect reports by internal auditors regarding their _________ _________ and review of securities and _________instruments.
bank safe-deposit box
If securities that exist in certificate form are not placed in the custody of an independent agent, they should be kept in a ________ _______ _________ _______ under the joint control of two or more of the company's officials.
Error Inadequate accounting manual; incompetent accounting personnel and Inadequate monitoring by internal auditors
Incomplete recording of investments: Failure to record derivative agreements that are embedded in other agreements
valuation presentation
Inspect Documentation of Management's Intent to classify derivative transactions as hedging activities. Which primary audit objectives?
Existence, Occurrence, Completeness, Rights, Accuracy, Valuation, Cutoff
Inspect securities on hand and review agreements underlying derivatives. Which primary audit objectives?
Error Inadequate controls over the processes for developing estimates of fair value, including use of incompetent personnel.
Misstatement of recorded value of investments: Failure to records changes in market values of investments. Error or Fraud? What type of internal control weakness?
Fraud Ineffective board of directors, audit committee, or internal audit function; "tone at the top" not conducive to ethical conduct; undue pressure to meet earning targets
Misstatement of recorded value of investments: Misstatement of the value of investments that do not have readily available market values. Fraud or Error? What type of internal control weakness?
Fraud Ineffective board of directors, audit committee, or internal audit function; "tone at the top" not conducive to ethical conduct; undue pressure to meet earning targets
Misstatement of recorded value of investments: Recording fictitious securities. Error or Fraud? What type of internal control weakness?
existence and rights occurrence
Obtain analysis of investments and related accounts and reconcile to ledger. Which primary audit objectives?
characteristics observable counterparty market liquidity
Obtain and understanding of the nature of the instruments being value, which include: the terms and __________-of the instruments the extent to which the fair value is based on inputs that are ___________; and other factors that bear on the valuation, including credit or ___________ risk, ___________risk and _________risk.
Completeness
Review investment committee minutes and reports. Which primary audit objectives?
management review controls
Reviews conducted by management of estimates and other kinds of financial information for reasonableness. They often involve the use of significant judgment, knowledge, and experience in comparing recorded amounts with expectations of the reviewers. They often are considered monitoring controls but may relate to any of the other COSO components that have the common characteristic of management review of information to identify misstatements or breakdowns in other controls.
increases
Securities are often very liquid and it significantly _________ the risk of fraud.
independent safekeeping agent
Segregation of the functions of custody and record keeping is achieved by the use of an _______ _________ _______ such as a stockbroker, bank, or trust company.
presentation and disclosure
Substantive Procedures for investment transactions and year-end balance Evaluate financial statement _________ and ________- of financial investments.
Existence, Occurrence, Rights, Accuracy, Valuation, Cutoff
Vouch selected purchases and sales of investments during the year. Which primary audit objectives?
joint control
neither of the two custodians may have access to the securities except in the presence of the other.
subsidiary name face amount certificate shares acquisition broker cost terms interest dividend
A complete detailed records of all securities and derivative instruments owned frequently consist of a ________ record for each security and derivative instrument, which such identifying data as the exact __________, __________ ______ or par value, ______ number, number of ____________, date of _____________, name of ___________, ________ , _______ and any ___________ or _______ payments received.
in recorded
A list of securities in the bank safe-deposit box should be maintained _______the box and the deposit or withdrawal of securities should be ________on this list along with the date and signatures of all persons present.
financial executive investment committee
A questionnaire used by the auditors in assessing controls relating to financial investments will include questions such as the following: Are all purchases and sales of securities and derivatives authorized by a ________ _________ and reviewed by an _________ ________ of the board of directors?
reviewing, accounting for, and valuing
A questionnaire used by the auditors in assessing controls relating to financial investments will include questions such as the following: Are competent personnel involved in _______, ________ ______ and _______ complex financial instruments?
joint control
A questionnaire used by the auditors in assessing controls relating to financial investments will include questions such as the following: Are securities and similar instruments under the _______ _______ of responsible officials?
risk management
A questionnaire used by the auditors in assessing controls relating to financial investments will include questions such as the following: Does that client have investment policies that reflect appropriate _______ _______?
retained
A questionnaire used by the auditors in assessing controls relating to financial investments will include questions such as the following: IS an independent safekeeping agent _________?
no direct
An independent agent has _______ _______ contact with the employee responsible for maintaining accounting records of the investments in securities.
on hand serial numbers control
An internal auditor or other responsible employee should, at frequent intervals, inspect the securities ______ ______, compare the _______ _____ and other identifying data of the securities examined with the accounting records, and reconcile the subsidiary record for securities with the __________account.
Existence, Occurrence, Rights, Accuracy, Valuation, Cutoff
Confirm securities and derivative instruments with holders and counterparties. Which primary audit objectives?
management review controls
Example of test of controls: Test ________ _________ _______ by inspecting monthly reports on securities owned, purchased, and sold and amounts of revenue earned and budgeted and by reviewing management follow-up on unusual items or relationships.
vouching a sample
Example of test of controls: Test controls over processing and recording investment transactions by _________ a _________ of transactions or using data analytics to test transactions.
Review and test
Example of test of controls: ________ and ______ reports of investment activity prepared for the investment committee
Existence Rights Occurrence Completeness
Perform analytical procedures or data analytics. Which primary audit objectives?
hedging
Substantive Procedures for investment transactions and year-end balance Inspect documentation of management's intent to classify derivative transactions as __________activities.
independent computations
Substantive Procedures for investment transactions and year-end balance Make _________ _________ of revenue from securities.
data analytics
Substantive Procedures for investment transactions and year-end balance Perform analytics procedures or _________ ________.
fair value
Substantive Procedures for investment transactions and year-end balance Test the estimates of the _______ _______ financial investments, including valuations used for tests of impairment.
Evaluate
Substantive Procedures for investment transactions and year-end balance ________ the method of accounting for investments.
derivatives
Substantive Procedures for investment transactions and year-end balances: Inspect securities on hand and review agreements underlying ____________.
minutes
Substantive Procedures for investment transactions and year-end balances: Review investment committee _________ and reports.
purchases and sales cutoff
Substantive Procedures for investment transactions and year-end balances: Vouch Selected _________ and _______ of financial investments during the year and verify the client's __________ of investment transactions.
Obtain or prepare
Substantive Procedures for investment transactions and year-end balances: _______ or ______--analyses of the investment accounts and related revenue, gain and loss accounts and reconcile them to the general ledger.
Confirm
Substantive Procedures for investment transactions and year-end balances: ___________ securities and derivative instruments with holders and counterparties.
user manuals service contracts service auditor visiting
The auditors may obtain information about the controls at a service organization by reviewing __________ __________ or other systems documentation, reviewing ________ ________, obtaining the report of a ________ _______, or personally _________ the service organization.
financial executive
The purchase and sale of investments often are entrusted to a responsible __________ ________, subject to frequent review by an investment committee of the board of directors.
company
The safe-deposit box rental should be in the name of the _______, not in the name of an officer having custody of securities.
always
The use of derivatives almost __________ increases the risk of material misstatement of the financial statements.
securities broker dealer
To assist in the valuation of financial instruments, the organization may employ a specialist or use information from a third party that provides pricing services, such as a ________ ________ or _________.
fraud Inadequate segregation of duties of record keeping for and custody of securities
Unauthorized investment transactions: an employee with access to securities converts them for personal use. Error or Fraud? What type of internal control weakness?