Which of the following procedures would be most appropriate for testing the existence of the client's investments in marketable securities held by a custodian?

Answer options:

Physically inspect the securities at the client's office.

Request a confirmation from the custodian.

Review the client's internal records of investment activity.

Recompute dividend income and verify against published records.

How to approach this question

Asset held by third party = Confirmation.

Full Answer

B.Request a confirmation from the custodian.✓ Correct

When investments are held by an independent custodian, the auditor should confirm the holdings directly with the custodian to establish existence and ownership.

Common mistakes

Thinking analytical procedures (dividends) prove existence of the asset.

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