The balance in the available-for-sale investment account at year-end is $10,400,600. After reviewing the confirmations from the

Question:

The balance in the available-for-sale investment account at year-end is $10,400,600. After reviewing the confirmations from the trustee, the auditors determine that the cost assigned to the investment account is $9,438,637. The investments' market value is $8,200,350, and the balance in the allowance account from the prior year is a debit balance of $4,000,000. Answer the following questions regarding the investments.
a. Describe three errors and three fraudulent actions that could have caused the discrepancy reported between the book investment value and the confirmed value.
b. What audit evidence would you gather to determine whether the misstatements were caused by the specific errors and fraudulent actions that you suggested?
c. Prepare the journal entry to record the adjustment to the book investments needed.
d. Prepare the journal entry needed to correct the balance in the allowance account.
e. How will the investments appear on the of the company?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...