preview

Essay on Case 10 8 Ellie Enterprise

Good Essays

Case 10-8 Ellie Enterprises An investment that is not one of the three traditional asset types such as stocks, bond and cash are considered as an alternative investment. “These types of investments include hedge funds, managed futures, real estate, commodities and derivative contracts.” (www.investopedia.com). These are subject to less regulation and use leverage and derivative instruments to optimize their returns. “In spite of many pensions and private endowments beginning to invest in these funds, the portion apportioned to them is still small usually less than 10%.” (www.investopedia.com). An alternative investment differs from publicly traded investments in three main ways: The alternative assets can be purchased in a privately …show more content…

Designing the confirmation request. Communicating the confirmation request to the appropriate third party. Obtaining the response from the third party. Evaluating the information, or lack thereof, provided by the third party about the audit objectives, including the reliability of that information. In this case, the confirmations do not provide sufficient competent audit evidence to support the existence of the investments. The main reason for this is that the information was not obtained from a third party as stated in the auditing standards. As discussed in audit procedure, the confirmation replies were received directly from Union which is not a third party. Because Union is the trustee and custodian of the pension fund, any information it would provide relating to the fund would potentially have inherent risk. As per the standards, the information received from Union would not meet the requirements as a sufficient confirmation. In order to acquire necessary evidence, through confirmation, to support the existence of the investments, the information would at least have to come directly from Cloudy Investments which it didn’t happen in this case. Also, even if the information would have been received from Cloudy

Get Access