CAT / FIA FAU Syllabus D. Audit Evidence And Procedures - Investments - Notes 13 / 18
Substantive procedures - Investments
Although investments are intangible NCA, the key areas for testing are similar to tangible NCA:
existence
confirmation of ownership
valuation by third parties
Key assertions relating to intangible assets are
Existence
Valuation
Audit procedures
Completeness
Obtain a summary of investments held, and reconcile the schedule of investments with the general ledger.
Match a sample of investments held to the investment register (or investments account)
Ownership
Confirm the company's ownership of the investments, by agreeing investments on the register to appropriate legal documents
Inspect investment documents checking they are in the client's name.
Valuation
Asset values, investment income or loss, gains or losses on sales of investments, and changes in fair value are recorded in accordance with accounting standards.
Check that investments in the portfolio are held at fair value in accordance with accounting standards, with any gains and losses in fair value being recognised as profit or loss.
Check market values for securities.
Presentation and disclosure
Verify that investments are properly described and classified in the SFP.
Check that any gains or losses on the portfolio have been properly classified in the P&L and OCI.
Additions
Verify the cost of significant purchases (by agreeing to sales note), and check they have been properly allocated to NCA by inspecting a sample.
Disposals
Verify disposals to supporting documentation, checking sales price, sale date and date proceeds received.
Recalculate the gain or loss from the sale of securities.