Customer Accounts: Ensure That the Firm Is Exercising Due Diligence

question 178

Multiple Choice

Customer accounts: Ensure that the firm is exercising due diligence in the opening and supervision of customer accounts. The procedures should be formalized in writing and in accordance with the rules and regulations of the appropriate regulatory authority. Ensure that daily customer positions and option exercises are in accordance with the limits established by the appropriate exchange. Verify that commissions generated by customer trades are properly calculated and posted to the general ledger.

• A) This is one of the primary audit objectives of stock and options
• B) This is one of the primary audit objectives of swaps
• C) This is one of the primary audit objectives of bonds
• D) None of these

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Definitions:

Proportional

A tax structure where the rate remains constant regardless of income level.

Progressive Tax Structure

A tax system where the tax rate increases as the taxable amount increases, leading to higher earners paying a larger percentage of their income in taxes.

Marginal Rates

These are the tax rates that apply to each additional dollar of income, used in a progressive tax system where tax rates increase as income rises.

Average Rates

The mean amount of a rate, such as interest or tax rate, calculated by totaling several rates and dividing by the number of rates.