Which of the Following Controls Would an Entity Most Likely

question 58

Multiple Choice

Which of the following controls would an entity most likely use in safeguarding against the loss of marketable securities?

• A) An independent trust company that has no direct contact with the employees who have recordkeeping responsibilities has possession of the securities.
• B) The internal auditor verifies the marketable securities in the entity's safe each year on the balance sheet date.
• C) The independent auditor traces all purchases and sales of marketable securities through the subsidiary ledgers to the general ledger.
• D) A designated member of the board of directors controls the securities in a bank safe-deposit box.

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Definitions:

Purchase Cost

Purchase Cost is the total expense incurred to acquire an asset or service, including the price paid and any additional charges necessary to put it into use.

Accrued Interest

Interest that has been incurred but not yet paid, often referring to the interest accruing on a bond between payment periods.

Sale Received

The funds collected from the sale of goods or services.

Accrued Interest

Interest that has accumulated on a loan or bond since the last payment date but has not yet been paid out.