IIA Exam IIA-CHAL-QISA Topic 3 Question 8 Discussion

Actual exam question for IIA's IIA-CHAL-QISA exam

Question #: 8
Topic #: 3

An organization invests excess short-term cash in trading securities Which of the following actions should an internal auditor take to test the valuation of those securities'*

AUse the equity method to recalculate the investment carrying value

BConfirm the securities held by the broker.

CPerform a calculation of premium or discount amortization.

DCompare the carrying value with current market quotations

Show Suggested Answer

Suggested Answer: D

Testing Valuation: The valuation of trading securities requires comparing their carrying value with current market prices to ensure accuracy.

Market Quotations: Current market quotations provide the most reliable and up-to-date information on the fair value of securities.

Accounting Standards: This approach is consistent with accounting standards that require securities to be reported at fair value, reflecting any unrealized gains or losses.

Verification Process: Comparing the carrying value with market quotations helps verify that the securities are appropriately valued on the financial statements.

International Financial Reporting Standards (IFRS) and Generally Accepted Accounting Principles (GAAP) regarding fair value measurement.

by Rueben at Jul 17, 2024, 11:48 AM

Limited Time Offer

25%

Off

Get Premium IIA-CHAL-QISA Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Madelyn

4 months ago

Haha, the equity method? Really? That's for investments in associates, not trading securities. I'm going with D, no doubt about it.

upvoted 0 times

Josphine

3 months ago

Yeah, D makes the most sense. We need to compare the carrying value with current market quotations to test the valuation.

upvoted 0 times

...

Devorah

3 months ago

I agree, the equity method is not the way to go for trading securities. D is definitely the right choice.

upvoted 0 times

...

Kattie

4 months ago

I still think comparing the carrying value with current market quotations is the most reliable method.

upvoted 0 times

...

Willow

4 months ago

That's a good point, Frederic. It's always good to have multiple ways to verify the valuation.

upvoted 0 times

...

Leslie

4 months ago

I'm torn between B and D. Both seem like reasonable approaches, but I'm leaning towards D as it directly tests the valuation.

upvoted 0 times

Kaycee

3 months ago

Let's go with D then, it's a solid approach to ensure the accuracy of the valuation.

upvoted 0 times

...

Berry

3 months ago

I agree, D seems like the most direct way to test the valuation of the trading securities.

upvoted 0 times

...

Carri

4 months ago

I think D is the best option. It directly compares the carrying value with current market quotations.

upvoted 0 times

...

Frederic

4 months ago

But wouldn't it also be important to confirm the securities held by the broker?

upvoted 0 times

...

Kattie

4 months ago

I agree with Willow, that seems like the most logical way to test the valuation.

upvoted 0 times

...

Tamala

5 months ago

Option B seems like a good idea. Confirming the securities held by the broker would provide a good check on the investment balance.

upvoted 0 times

Toshia

4 months ago

Using the equity method to recalculate the investment carrying value could give us a more accurate picture.

upvoted 0 times

...

Jarod

4 months ago

I think comparing the carrying value with current market quotations is also important.

upvoted 0 times

...

Hildred

4 months ago

I agree, confirming with the broker is a smart move.

upvoted 0 times

...

Willow

5 months ago

I think we should compare the carrying value with current market quotations.

upvoted 0 times

...

Daniel

5 months ago

I think the correct answer is D. Comparing the carrying value with current market quotations is the best way to test the valuation of the trading securities.

upvoted 0 times

Clorinda

4 months ago

I think so too, it's important to make sure the securities are valued accurately.

upvoted 0 times

...

Emeline

4 months ago

I agree, D seems like the most logical choice.

upvoted 0 times

...