Question

If the client maintains custody of its investments, the auditor normally examines the

actual securities.state whether the above statement is:
a.True
b.False

Answer 1

The statement is true; auditors typically inspect actual securities when a client maintains custody of its investments to ensure existence and rights.

Step-by-step explanation:

The statement is true. In auditing, when a client maintains custody of its investments, auditors typically perform a physical examination of the actual securities. This process is a fundamental step in verifying the existence of the investments and confirming the client's ownership rights. Physically inspecting the securities helps ensure that the recorded investments accurately represent the tangible assets held by the client.

In addition to the physical examination, auditors may employ other procedures such as obtaining confirmations from third parties, reviewing relevant documentation, and assessing the client's internal controls and safekeeping procedures. These comprehensive audit procedures aim to provide assurance regarding the accuracy and reliability of the client's financial statements, particularly concerning the valuation and existence of investment assets.