Which of the following controls would be most effective in ensuring that the proper custody of assets in the investing cycle is maintained?
A)Direct access to securities in the safety deposit box is limited to only one corporate officer.
B)Personnel who post investment transactions to the general ledger are not permitted to update the investment subsidiary ledger.
C)The purchase and sale of investments are executed on the specific authorization of the board of directors.
D)Independent personnel periodically compare the recorded balances in the investment subsidiary ledger with the contents of the safety deposit box.

Question

Quizplus · Accepted Answer

The most effective control in ensuring proper custody of assets in the investing cycle is independent personnel periodically comparing recorded balances in the investment subsidiary ledger with the contents of the safety deposit box. This control ensures that the assets actually exist and are being properly safeguarded. Direct access to securities in the safety deposit box by only one corporate officer is a restrictive control that does not address the custody of assets issue. Personnel who post investment transactions not being permitted to update the investment subsidiary ledger is a segregation of duties control that is more relevant to the initiating and recording transactions stage of the investing cycle. The purchase and sale of investments being executed on the specific authorization of the board of directors is a governance control that is more relevant to the strategic decision-making stage of the investing cycle.

Which of the Following Controls Would Be Most Effective in Ensuring