When the Client Holds a Large Amount of Negotiable Securities

question 79

Multiple Choice

When the client holds a large amount of negotiable securities, auditors need to plan to guard against:

• A)unauthorized negotiation of the securities before they are counted.
• B)unrecorded sales of securities after they are counted.
• C)substitution of securities already counted for other securities that should be on hand but are not.
• D)substitution of authentic securities with counterfeit securities.

---

Definitions:

Investment Banking Process

A series of actions in investment banking involving advisory services, underwriting, and facilitating transactions like mergers and acquisitions for clients.

Primary Market

The primary market is where new securities are issued and sold for the first time to investors, typically involving initial public offerings (IPOs) by companies.

Breakeven Interest Rate

The interest rate at which the cost of borrowing equals the income from an investment, resulting in no profit or loss.

Flotation Costs

Expenses incurred by a company in issuing new securities, including underwriting fees, legal fees, and registration fees, affecting the net proceeds from the offering.