Wendy Manzur Ch 10 Homework
10.48 Investment Securities
a. objective for securities are to obtain evidence regarding
-Existence of the investment securities at the balance-sheet date.
-Ownership of the investment securities.
-Accurate cost and market value of the investment securities.
-Proper classification of the investment securities.
-Proper presentation and disclosure of the investment securities in the financial statements.
-Proper recognition of interest income.
-Proper recognition of investment gains and losses.
b. Audit Procedures that should be undertaken with ...view middle of the document...
- Examine documents in support of purchases and sales of investment securities.
- Obtain a client representation letter.
- Verify the calculation equity method income.
d. Audit Procedures that should be undertaken about classification;
-Study written records of investment strategies.
- Review instructions to portfolio managers.
-Study the company’s cash flow forecasts.
-Determine the company’s financial position, working capital requirements.
e. Fair market value about the portfolio;
- Determine whether the securities are actively traded in a broad market.
- Obtain published market quotations.
-Obtain market prices from broker- dealers who are market makers in particular
f. Determine whether value of impairments are “ other than temporary” by looking at the
evidence of the following:
- Fair value is materially below cost
- The value decline is industry or geographically specific.
- The fair value decline has existed for a long time.
- The financial condition of the issuer has deteriorated.
- Dividends of interest payments have been reduced or eliminated.
10.54 Long- Term Financing Agreement
1) Obtain an understanding of the business purpose of the loans made by the president.
2) Confirm the loans by direct communication.
3) Verify payments made during the year and transactions after the year-end.
4) Obtain a management representation letter.
5) Recomputed interest expense and interest payable.
1) Financial statements should disclose information about the nature of the related party relationship.
2) Financial statements should disclose information about the dollar amount of the loans.
3) Financial statements should disclose information about amounts due and terms of settlement.