Why the marketable securities contain less inherent risk


  1. Evaluate the following statement made by an auditor: "In comparison with other accounts, cash and marketable securities contain less inherent risk. There are no significant valuation problems with cash. Marketable securities can be verified by consulting the closing price in the Wall Street Journal." Do you agree or disagree? Why or why not?
  2. Do you think the focus on inherent risks to cash at a business entity actually make cash less risky? Could that be a result of controls and awareness, or does it change the riskiness at all? Explain your answer.
  3. Describe the responsibility of each of the following with respect to cash: the client, the auditor, and the board of directors. Are the responsibilities of any of these parties ever in conflict?

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Accounting Basics: Why the marketable securities contain less inherent risk
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