Final answer:
Auditing financial instruments involves using analytical procedures to analyze risk, compare financial data, and understand investor considerations. These procedures facilitate the detection of inconsistencies and potential issues in financial reporting. Adding such analysis to a portfolio can demonstrate both academic and personal growth.
Step-by-step explanation:
When auditing financial instruments, analytical procedures can be used to analyze the risk involved in different types of financial assets. Analytical procedures provide a means to compare or contrast financial data, giving the auditor insight into inconsistencies or potential misstatements. They can also be used to conduct research and report results on the financial instrument's performance. Understanding the considerations important to investors in the financial market, such as risk tolerance and investment objectives, is crucial for auditors during the analysis. Through the use of analytical procedures, auditors are able to look at a subject, offering a skill set for crafting various financial reports. After completing the analysis, one might consider adding the analytical report to a portfolio along with a cover letter or journal entry, responding to what was learned through the auditing process and how it applies to academic and personal growth. Financial market considerations, such as liquidity, interest rate risk, and credit risk, among others, are significant to investors and thus, are also essential during an audit to recommend a solution if a problem is found in the financial statements.