The audit procedures are as follows:
1. Check authorization for the purchase of the investments e.g. review of appropriate board minute
2. Vouch the purchase to brokers contract note, and share certificate to the cash book payment
3. Examine the share certificate to ensure that the type of security and number of shares agrees with the investment account and that the shares are held in the company’s name
4. Use a share information service to ascertain the dividends which should have been received during the year. Check these to the client company records
5. Use an appropriate publication/news media to obtain middle market value at the balance sheet date. Check that this is disclosed in the accounts.
6. If any other method of valuation has been used by the company, discover the reasons and confirm that the method is appropriate and is disclosed
7. If balance sheet date valuation is below cost, confirm that no permanent diminution in value is likely or if it is ensure that an appropriate provision for loss is made
8. Check that the investments are properly classified for Company Act disclosure purposes
INCOME FROM QUOTED INVESTMENTS:
1. Take a sample of investment and check the income record to a share information service
2. Vouch a sample of receipts to the dividend vouchers received
3. Check that income tax deducted from interest received is accounted for and will be or has been reclaimed by the company
4. Check that dividends are shown inclusive of tax credits in the profit and loss account.