When auditing financial instruments, a confirmation is sent to the broker-dealer
A) only if the client has poor internal controls.
B) to confirm interest and dividends.
C) to provide assurance on realizable value.
D) to confirm year-end holdings.

Question

Quizplus · Accepted Answer

When auditing financial instruments, a confirmation is sent to the broker-dealer to confirm year-end holdings. This helps the auditor ensure that the amounts reported by the client are accurate and complete. Confirmation of interest and dividends may also be necessary, but it is not the primary purpose of a broker-dealer confirmation. Poor internal controls may increase the need for confirmation, but it is not a prerequisite for sending a confirmation. Realizable value may be assessed through other audit procedures, such as valuation using independent pricing sources.

When Auditing Financial Instruments, a Confirmation Is Sent to the Broker-Dealer