In connection with his examination of the financial statements of Belasco Chemicals, Inc., Kenneth Mack, CPA, is considering the necessity of inspecting marketable securities on the balance sheet date, May \(31,19 X 1\) or at some other date. The marketable securities held by Belasco include negotiable bearer bonds, which are kept in a safe in the treasurer's office, and miscellaneous stocks and bonds kept in a safe deposit box at The Merchants Bank. Both the negotiable bearer bonds and the miscellaneous stocks and bonds are material to proper presentation of Belasco's financial position.

Required:

a. What are the factors that Mr. Mack should consider in determining the necessity for inspecting these securities on May \(31,19 X 1\), as opposed to other dates?

b. Assume that Mr. Mack plans to send a member of his staff to Belasco's offices and The Merchants Bank on May 31, 19X1, to make the security inspection. What instructions should he give to this staff member as to the conduct of the inspection and the evidence to be included in the audit working papers? (Note: Do not discuss the valuation of securities, the income from securities, or the examination of information contained in the books and records of the company.)

c. Assume that Mack finds it impracticable to send a member of his staff to Belasco's offices and The Merchants Bank on May 31, 19X1. What alternative procedures may he employ to assure himself that the Company had physical possession of its marketable securities on May 31, \(19 \times 1\), if the securities are inspected (1) May 28, 19X1? (2) June 5, 19X1?