CHAPTER 10 SUBSTANTIVE TESTS OF INVESTMENTS - CHAPTER 10 10-1 The CPAs would accept a confirmation of the securities on hand from the custodian in lieu

CHAPTER 10 SUBSTANTIVE TESTS OF INVESTMENTS - CHAPTER 10...

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CHAPTER 10: SUBSTANTIVE TESTS OF INVESTMENTS 10-1 10-5.Pink Corporation(a)Instructions to be given to the assistant regarding the examination of the securities kept in the safe deposit box include the following: (1) A copy of the client’s record of the contents of the box should be obtained and used in connection with the inspection of the securities. Comparing the contents of the box and the record will provide assurance that all securities listed in the record are on hand. (The validity of the record will be determined by examination of the transactions pertaining to investments.) The copy of the record, after being verified, should be added to the auditors’ working papers as evidence of work performed. (2) The bank’s record of persons entering the deposit box should be examined to determine that only authorized persons have had access to the box and that there was no entry to the box between December 31 and January 11. Entry to the box between those dates may be an indication that a security was returned to safekeeping after being “borrowed” at year-end. The security may have been “borrowed” and used as collateral to obtain cash to cover a shortage at December 31. (3) The assistant should be instructed to insist that the treasurer be present while the securities are being examined.
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