A Client Has a Large and Active Investment Portfolio That

question 8

Multiple Choice

A client has a large and active investment portfolio that is kept in a bank safe deposit box. If the auditors are unable to count securities at the balance-sheet date, they most likely will:

• A)request the bank to confirm to the auditors the contents of the safe deposit box at the balance-sheet date.
• B)examine supporting evidence for transactions occurring during the year.
• C)count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance-sheet date.
• D)request the client to have the bank seal the safe deposit box until the auditors can count the securities at a subsequent date.

---

Definitions:

Fixed Cost

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance.

Profit

The difference between the amounts received from customers for goods or services provided and the amounts paid for the inputs used to provide the goods or services.

Direct Materials Cost

The expense associated with raw materials directly incorporated into a finished product.

Break-even Point

Break-even Point is the financial analysis term that indicates when total costs and total revenues are exactly equal, resulting in neither profit nor loss.