For Each Test of Transactions and Each Test of Account

question 60

Essay

For each test of transactions and each test of account balances for investments listed below, identify the assertion for which the test provides evidence.
1. Determine whether there has been any permanent impairment in the value of the cost basis of an individual security.
2. Inspect securities if they are maintained by the entity or obtain a confirmation from an independent custodian.
3. Search for purchases of securities by examining transactions for a few days after year-end.
4. Examine brokers' advices for a sample of securities purchased during the year.

---

Definitions:

Bond Issues

The process of offering bonds to investors, which are debt securities constituting a loan to the issuer from the bondholder.

Cost of Debt

The effective rate that a company pays on its current debt, which can include bonds, loans, and other forms of debt, influencing its capital structure decisions.

Cost of Capital

The rate of return that a company must achieve in order to justify the cost of an investment, often influencing investment decisions.

Beta

A unit of measurement for the swings, or integral risk, experienced by a security or portfolio in relation to the wider market.