Free AICPA CPA-Auditing Exam Dumps

Choice 'a' is correct. The control most likely to be used by an entity in safeguarding against the loss of marketable securities is that an independent trust company that has no direct contact with the employees who have recordkeeping responsibilities, has possession of the securities. For good internal control over the safeguarding of any asset, the individual who has the recordkeeping responsibilities over that asset should never have access to it.

Choice 'b' is incorrect. Verifying the securities held in the entity's safe would detect that the loss occurred, but it would not prevent the loss.

Choice 'c' is incorrect. Tracing purchases and sales of marketable securities would verify that the transactions were properly recorded, but would not safeguard against loss.

Choice 'd' is incorrect. Having one person control the securities in a bank safe-deposit box is a weakness in internal control because that one person can steal the securities. A better system requires that at least two employees have joint control over the securities in a bank safe-deposit box.

Choice 'd' is correct. If the auditor performs sufficient procedures, he or she may report on whether the information is fairly stated, in all material respects, in relation to the financial statements.

Choices 'a' and 'b' are incorrect. The auditor may report on such information.

Choice 'c' is incorrect. The report provides positive assurance about whether the information is fairly stated, in all material respects, in relation to the financial statements.