In Establishing the Existence and Ownership of a Long-Term Investment

question 1037

Multiple Choice

In establishing the existence and ownership of a long-term investment in the form of publicly-traded stock, an auditor should inspect the securities or:

• A) Correspond with the investee company to verify the number of shares owned.
• B) Inspect the audited financial statements of the investee company.
• C) Confirm the number of shares owned that are held by an independent custodian.
• D) Determine that the investment is carried at the lower of cost or market.

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Definitions:

Gratuitous Agent

An agent who acts on behalf of another without any compensation for their services.

Duty Of Loyalty

An obligation of fiduciaries to act in the best interest of the beneficiaries or the entities they serve, avoiding conflicts of interest.

Sales Agent

An individual or entity authorized to sell and market products or services on behalf of another party, known as the principal.

Personal Bank Account

An account maintained by an individual at a bank or other financial institution for the purpose of managing personal funds.