In establishing the existence and ownership of long-term investments in the form of publicly-traded stock, an auditor most likely would inspect the securities or:

Question

Quizplus · Accepted Answer

Choice "B" is correct. Confirmations should be requested from the custodian for securities that are in the possession of third parties. Choice "A" is incorrect. The investee company may not have timely information regarding the ownership of its stock, nor would an investee typically want to correspond with all of its shareholders in this manner. Choice "C" is incorrect. Analytical procedures might be used to test the reasonableness of dividend income, but this would not provide evidence about the existence and ownership of the investments. Choice "D" is incorrect. Inspecting the cash receipts journal for amounts that could represent the sale of securities might provide evidence regarding sales (and gains or losses on sales), but would not provide evidence about the existence and ownership of the investments.

In Establishing the Existence and Ownership of Long-Term Investments in the Form