Hammer Orthopedic Corporation periodically invests large sums in marketable equity securities. The investment policy is established by the investment committee of the board of directors and the treasurer is responsible for carrying out the directives of the investment committee. All securities are stored in a bank safe-deposit box.
The following issues are included in the independent auditors’ plan for auditing internal control with respect to the company’s investments in marketable equity securities. To understand the design of the system, the audit procedure is to make the following inquiries of management:
1. Are all securities stored in a bank safe-deposit box?
2. Is investment policy established by the investment committee of the board of directors?
3. Is the treasurer solely responsible for carrying out the investment committee’s directives?
In addition to these questions, what other questions should the auditor ask with respect to Hammer’s marketable equity security investments?