(tanpa subjek)

1 pesan

Provita Sari <digitalfutures03@gmail.com> Sel, 7 Nov

Kepada: Moh.fauzi99@gmail.com

1 Approved Answer

Sangeetha C answered on December 11, 2020

4 Rating
Question –
a. Identify the inherent and control risks related to the financial instruments accounts for McNeil Co.
Answer –
Control risk is expanded by the fact that the CEO is making investment decisions without any observing. He is examining his strategy with the board of directors
using a brokerage firm to execute trades, but the board does not endorse the investments in advance. There don't show up to be any limits set on his ability to en
investment exchanges. This moreover increments the pressure on the CEO to show a profit from the investment strategy. The utilize of a brokerage firm to execu
brings down the control risk expecting internal controls at the brokerage firm have been tested and are considered viable.

Question –
b. Identify at least two audit procedures the auditor would perform to test the existence balance-related audit objective for the trading and available-for-sale secu
Answer –
The auditor would test the existence balance-related audit objective by confirming with the broker any equity investments held at year end. For the derivative fina
instruments, the auditor would review the underlying agreements.

Question –
c. How would the auditor test the completeness balance-related audit objective for the speculative derivative financial instruments?
Answer –
It is difficult to test for completeness of subsidiary contracts as they frequently don't include an exchange of cash up front but represent a commitment to perfor
the future. To test completeness of the derivative financial instruments, the auditor would request the counterparty to existing subordinates to supply data relate
terms and whether there are any side agreements. To look for unrecorded derivative contracts, the auditor may request information from all counterparties the c
has executed with during the year indeed in the event that the records don't demonstrate any agreements extraordinary at the end of the financial year. The audit
examined other financial instruments contracts to explore for embedded derivatives and would examined board of director meeting minutes for discourse of der
contracts that are not recorded. The auditor would moreover look following year-end for settlement of any contracts that ought to have been recorded at year en

Question –
d. Identify at least two audit procedures the auditor would perform to test the realizable value balance-related audit objective for the financial instruments accou
Assume the investments in stock are all actively-traded in a liquid market, but the derivative financial instruments require a level 3 fair value estimate.
Answer –
To test the fair value of the equity securities, the auditor will confirm the ending market esteem as recorded on the client’s schedule of equity investment activity
alluding to quoted market costs from a source such as a financial publication or the stock trade. To test the fair value of the level 3 estimates for the derivative fi
instruments, the auditor must first understand the strategy utilized by management to create the fair value estimate. On the off chance that the derivative instrum
esteemed by management using a valuation model, the auditor ought to get evidence by performing strategies such as assessing the appropriateness of the mo
utilized and the reasonableness of estimates. This will require judgment on the auditor’s part as well as information of valuation procedures and the market facto
influence presumptions utilized (e.g., liquidity risk, credit risk, intrigued rate risk). The auditor can develop an independent estimate to authenticate the sensibility
management’s estimate and also use the benefit of hindsight to compare the fair value estimate to transactions subsequent to year-end.
Question –
e. In your opinion, would the audit of financial instruments require the use of a valuation specialist? Why or why not?
Answer –
It is profoundly likely the auditor would utilize a valuation specialist for the audit of financial instruments when level 3 fair value estimates are included. It is impo
the auditor will have the valuation skill vital to create an independent estimate. In case management uses a pro to develop their fair value estimate, the auditor m
guarantee the pro is objective and qualified and the auditor must understand the strategies utilized by the specialist to create the estimate.