Auditors Should Be Aware of the Following Control and Monitoring

question 360

Multiple Choice

Auditors should be aware of the following control and monitoring activities typically associated with securities lending EXCEPT:

• A) Reviewing counterparties for credit worthiness and obtaining master trade agreements and credit approval for counterparties before entering into stock-loan or stock-borrow transaction
• B) Establishing transaction limits by counterparty
• C) Obtaining physical possession or control of all collateral
• D) Establishing position and credit limits by counterparty

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Definitions:

Federal Securities

Financial instruments issued by the federal government, such as treasury bills and bonds, used to raise funds for governmental expenditures.

Common Stock

Common stock is a type of security that represents ownership in a corporation, with holders typically having voting rights and potential dividends.

Corporate Bonds

This is a debt of the corporation. Bondholders have loaned money to the company and are its creditors.

Monetary Policy

The process by which a central bank, currency board, or regulatory authority manages the money supply to achieve specific goals such as controlling inflation, maintaining employment, and stabilizing the currency.