Which of the Following Activity/ies Should Be Considered by the Auditors

question 428

Multiple Choice

Which of the following activity/ies should be considered by the auditors whenever reviewing situations where broker-dealer finance proprietary or customer activity through collateralized bank loans?

• A) Ensuring that customer, noncustomer, and firm bank loans are separately maintained and that procedures are in place to prevent commingling of collateral
• B) Maintaining separate accounts in the general ledger for the securities collateralizing each loan
• C) Obtaining collateral from the counterparty
• D) Reconciling the repurchase and reverse repurchase subsidiary ledgers to the stock record and general ledger daily. Out-of-balances are recorded as suspense items and researched immediately

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Definitions:

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan balance.

Non-interest Bearing

A financial term indicating a debt or deposit that does not accrue interest over time, identical in concept to its prior mention but explained with different wording.

Compounded Monthly

A method of calculating interest where the interest earned each month is added to the principal, compounding the amount on which future interest is calculated.

Compounded Semi-annually

The process of adding interest to the principal sum of a loan or deposit on a twice-yearly basis, resulting in interest on interest.