When Auditing Financial Instruments

question 13

Multiple Choice

When auditing financial instruments,

• A) the auditor usually performs more extensive substantive testing to reduce reliance on controls.
• B) analytical procedures are critical in assessing the year-end balances for financial instruments.
• C) the auditor relies on statements and broker's advices from investment managers to test purchases and sales as long as controls were deemed effective.
• D) tests of transactions are generally not performed.

---

Definitions:

Fracture Zone

An area in oceanic or continental crust characterized by cracks and faults due to tectonic stresses, often associated with earthquake activity.

Plate Boundary

The edges where tectonic plates meet, which can be sites of earthquakes, volcanoes, and mountain building.

Pacific Ring

A region encircling the Pacific Ocean characterized by active volcanoes and frequent earthquakes, known as the Pacific Ring of Fire.

Fire

A rapid oxidation process, which is a chemical reaction resulting in the release of heat and light.