Course Hero Logo

Chapter 1 - Audit of Investments.docx - Chapter 1: AUDIT OF...

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 1 - 2 out of 4 pages.

Chapter 1:AUDIT OF INVESTMENTSChapter Objectives:This chapter should enable you to know and understand:The audit program for investments.The audit objectives and procedures to be done.Audit InvestmentsOverviewAs auditors, we usually audit investments that the client hason their financial statements by testing variousauditassertionsincluding existence, completeness, valuation, andrights and obligations.In the audit of investments, the inherent risk of investmentsinvolves more on the existence and valuation of theirbalances. This is due to the risk of overstatement ofinvestments is higher than the risk of an understatement andan overstatement, in this case, could be due to fraud.The inherent risk of investments is that client’s investmentsmay be stolen and their balances may be overstated to coverup the fraud. Additionally, as there are many types ofinvestments, investments may be wrongly classified, eitherintentional or unintentional, resulting in improper valuation.Another issue concerning the valuation assertion ofinvestment account is the lack of the client’s staff knowledgeand the complexity of valuation itself.Audit Assertions for InvestmentsIn the audit of investments, we usually test the auditassertions that are included in the table below:Audit assertions for investmentsExistenceInvestments reported on the financialstatements really exists at the reportingdate.ValuationInvestment balances truly reflect theiractual economic value as at reportingdate.CompletenessAll investments that should have beenrecorded have actually been recorded.Rights andobligationsThe client has ownership rights for allinvestments as of the reporting date.

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 4 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Fall
Professor
Maxine
Tags
Comprehensive income, Generally Accepted Accounting Principles, Cola Company

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture