Financial Investments - Financial Investments The most...

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Financial Investments The most important group of financial investments, from the viewpoint of the auditors, consists of marketable stocks and bonds because they are found more frequently and usually are of great dollar value than other kinds of investment holdings. Derivatives Derivatives are financial instruments that "derive" their value from other financial instruments, underlying assets, or indexes. For example, a simple derivative would involve a commitment by a company to purchase a commodity at a certain price at some point in the future. Other derivatives are much more complex, involving, for example, relationships between fluctuations in European interest rates and the price of copper. Auditors' Objectives in Auditing Financial Investments 1. Use the understanding of the client and its environment to assess inherent risk including fraud risks. 2. Obtain an understanding of internal control over investments. 3. Assess the RMM of investments and design further audit procedures that:…
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This note was uploaded on 10/13/2010 for the course ACCTG 471 at Pennsylvania State University, University Park.

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Financial Investments - Financial Investments The most...

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