A Client Has a Large and Active Investment Portfolio That

question 39

Multiple Choice

A client has a large and active investment portfolio that is kept in a bank safe-deposit box.If the auditor is unable to examine and count the securities at the balance sheet date but will examine and count the securities shortly thereafter,the auditor most likely will

• A) Request that the bank confirm to the auditor the contents of the safe-deposit box at the balance sheet date.
• B) Examine supporting evidence for transactions occurring during the year.
• C) Count the securities at a subsequent date and confirm with the bank whether securities were added or removed since the balance sheet date.
• D) Request that the client have the bank seal the safe-deposit box until the auditor can count the securities at a subsequent date.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the expected (standard) variable overhead allocated based on activity levels.

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours expected to produce a certain level of output, multiplied by the standard labor rate.

Labor Rate Variance

The difference between the actual cost of labor and the expected (or standard) cost, often used in manufacturing to measure efficiency and cost management.

Favorable

A term typically used in budgeting and accounting to describe variances or outcomes that are better than expected or budgeted figures.