Investments 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

  1. Existence

  2. 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.

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