Following are typical questions that might appear on an internal control questionnaire for investments in marketable securities.
1. Is custody of investment securities maintained by an employee who does not maintain the detailed records of the securities?
2. Are securities registered in the company name?
3. Are investment activities reviewed by an investment committee of the board of directors?
a. Describe the purpose of each of the above controls.
b. Describe the manner in which each of the above procedures might be tested.
c. Assuming that the operating effectiveness of each of the above procedures is found to be inadequate, describe how the auditors might alter their substantive procedures to compensate for the increased level of control risk.