Sample interview questions: Can you explain the process of auditing investments in other entities (ASC 321)?
Sample answer:
Auditing Investments in Other Entities (ASC 321)
Objectives:
- Determine the fair value of the investment
- Assess the investment’s risk and return
- Evaluate the adequacy of the carrying amount
- Comply with accounting and regulatory requirements
Steps:
1. Planning:
- Understand the nature and terms of the investment
- Determine the audit approach and relevant procedures
- Assess inherent and control risks
2. Risk Assessment:
- Identify potential areas of misstatement or noncompliance
- Consider the entity’s industry, size, and complexity
- Evaluate internal controls over financial reporting and investment accounting
3. Testing Controls:
- Perform walkthroughs and test transactions to evaluate the effectiveness of controls
- Identify weaknesses and recommend improvements
4. Substantive Procedures:
Evaluation of Fair Value:
- Obtain independent appraisals or market quotations
- Consider the entity’s methodology for determinin… Read full answer