To Satisfy the Valuation Assertion When Auditing an Investment in Another

question 9

Multiple Choice

To satisfy the valuation assertion when auditing an investment in another company that is publicly and actively traded, an auditor most likely would seek to:

• 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.
• D)obtain market quotations from The Wall Street Journal or another independent source.

---

Definitions:

Break-Even Sales

The amount of revenue that is exactly sufficient to cover both fixed and variable costs, resulting in neither profit nor loss.

Break-Even

The point at which total revenues equal total costs, resulting in no net loss or gain.

Total Dollar Sales

The aggregate revenue a company generates from the sale of its goods or services before any expenses are subtracted.

Net Operating Income

A company's income from operations, calculated as gross profit minus operating expenses, excluding taxes and interest.