In Establishing the Existence and Ownership of a Long-Term Investment

question 31

Multiple Choice

In establishing the existence and ownership of a long-term investment in stock of a publicly traded company, an auditor should inspect the securities or:

• A)correspond with the investee company to verify the number of shares owned.
• B)inspect the audited financial statements of the investee company.
• C)confirm the number of shares owned that are held by an independent custodian.
• D)determine that the investment is carried at the lower-of-cost-or-market.

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Definitions:

Fringe Benefits

Additional compensation given to employees beyond their base wage or salary, such as health insurance, paid vacation, or retirement plans.

Take-Home Pay

Net income after all deductions like taxes, social security, and retirement contributions are subtracted from an individual's gross salary.

Nominal Wage

The wage paid to workers measured in current money terms, without adjusting for inflation, reflecting the actual amount received.

Price Level

The overall average price of the complete range of goods and services available in the economy.