In the audit of investment securities, auditors develop specific audit assertions related tothe investments. They then design specific substantive procedures to obtain evidenceabout each of these assertions. Following is a selection of investment securities assertions:
1. Investments are properly described and classified in the financial statements.
2. Recorded investments represent investments actually owned at the balance sheet date.
3. Trading investments are properly valued at fair market value at the balance sheet date.
Required:For each of these assertions, select the following audit procedures that is bestsuited for the audit plan. Select only one procedure for each assertion. A procedure may beselected once or not at all.
A.Trace opening balances in the subsidiary ledger to prior year’s audit working papers.
B.Determine that employees who are authorized to sell investments do not have access to cash.
C. Examine supporting documents for a sample of investment transactions to verify thatprenumbered documents are used.
D.Determine that any impairments in the price of investments have been properly recorded.
E. Verify that transfers from the current to the non-current investment portfolio have beenproperly recorded.
F.Obtain positive confirmations as of the balance sheet date of investments held by independentcustodians.
G. Trace investment transactions to minutes of the Board of Directors meetings to determine thattransactions were properly authorized