You have received an investment analysis from B, P, & J’s management revealing t

Question

You have received an investment analysis from B, P, & J’s management revealing the following:

· There is a notation indicating that all securities either are in the treasurer’s safe or held by an independent bank custodian.

· Investments are classied as current or noncurrent. ·

The beginning and ending balances are shown at cost and market.

· Unamortized premiums or discounts are associated with bonds.

· The face amount of bonds or number of shares of stock are given for the beginning and ending of the year.

· Accrued investment income for each investment at the beginning and ending of the year is presented.

· Investment income earned and collected is presented.

· Valuation allowances at the beginning and ending of the year are shown.

· Any sales or additions to portfolios for the year include date, number of shares, face amount of bonds, proceeds, cost, and realized gain/loss.

Based on the information above, identify explain the audit objective for each of the listed management nancial statement assertions relative to investments.

e - Existence - Completeness - Valuation/Allocation Presentation and Disclosure

Explanation / Answer

Assertion Audit Objective Existence To check whether investments really exists or not. In current case, investments are held either in the treasurer's safe or by an independent bank custodian. For investments held in treasurer's safe, auditor will inspect securities on hand. For investments held by an independent custodian, auditor will obtain confirmation from the custodian to provide evidence as to the existence of such investments. Completeness To verify whether the entity has disclosed all the investments in the financial investments. In current case, the entity has presented the investment income earned and collected. Auditor will perform analytics by comparing the investment income with those of prior years to ascertain the completeness of investment income recorded in the books. Valuation/Allocation The obejective is to check the reasionableness of the valuation method adopted by the entity to value its investments. In this case, the entity has disclosed the valuation allowances at the beginning and ending of the year. The auditor will draw a parallel between the valuation allowances of both the years and enquire about the reasonableness of the same. Presentation & disclosure The objective is to make ensure that investments are properly presented and disclosed in the financial statements. In this case, it is mentioned that investments are classified as current or non-current. The auditor will inquire about the basis of such classification.

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