When an Entity Uses a Trust Company as Custodian of Its

question 14

Multiple Choice

When an entity uses a trust company as custodian of its marketable securities,the possibility of concealing fraud most likely would be reduced if the

• A) Trust company has no direct contact with the entity employees responsible for maintaining investment accounting records.
• B) Securities are registered in the name of the trust company rather than the entity itself.
• C) Interest and dividend checks are mailed directly to an entity employee who is authorized to sell securities.
• D) The trust company places the securities in a bank safe deposit vault under the custodian's exclusive control.

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Definitions:

Double-Declining-Balance Method

A method of accelerated depreciation that doubles the straight-line depreciation rate and applies it to the remaining book value each year.

Financial Reporting

The process of producing statements that disclose an organization's financial status to management, investors, and the government.

High Technology

Refers to the most advanced technology available, often characterized by innovative, cutting-edge developments in fields such as information technology, robotics, and biotechnology.

Goodwill

An intangible asset that arises when a business is acquired for more than the sum of the fair value of its identifiable tangible and intangible assets and liabilities.