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.

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Definitions:

Original Jurisdiction

The authority of a court to hear a case for the first time as opposed to reviewing a lower court's decision.

Arbitrator

A neutral third party who resolves disputes outside the court, whose decision the disputing parties agree to abide by.

Compromise Decision

A resolution or agreement reached by each side making concessions, especially in a legal or business context, to settle a dispute or disagreement.

Mediation

A type of intensive negotiation in which disputing parties select a neutral party to help facilitate communication and suggest ways for the parties to solve their dispute.