When a client engages in transactions involving derivatives, the auditor should: Notify the audit committee about the risks involved in derivative transactions. Develop an understanding of the economic substance of each derivative. Confirm with the client's broker whether the derivatives are for trading purposes. Add an explanatory paragraph to the auditor's report describing the risks associated with each derivative.

When a client engages in transactions involving derivatives, the auditor should: Notify the audit committee about the risks involved in derivative transactions. Develop an understanding of the economic substance of each derivative. Confirm with the client's broker whether the derivatives are for trading purposes. Add an explanatory paragraph to the auditor's report describing the risks associated with each derivative.

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN:9781305080577

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter16: Advanced Topics Concerning Complex Auditing Judgments

Section: Chapter Questions

Problem 26MCQ

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Similar questions

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During the review of loan contracts and agreements, the auditor would most likely figure out the following, except: Choices Related disclosures pertaining to assets pledged as collateral. The accuracy of interest expense recorded by the entity. The existence of loans. The completeness of loans.
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if the auditor want to assure that Receivables have not been sold. What assertion he or she want to test : Select one: a. Existence b. Completeness c. Rights and obligations d. Valuation and allocation
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In performing risk assessment procedures for investments, an auditor may inquire of the client personnel which of the following questions? O Is access to investment securities restricted to at least two authorized officials? O Are the duties of authorization, custody, recording keeping and valuation of investment securities transactions segregated? O All of the choices. O Are investment securities acquisitions and disposals properly authorized by the board of directors?
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Describe the due diligence and causation defenses available to auditors under the Securities Act.