The financial auditor must adapt his examination to fully established objectives, by programs and procedures that give him a certain reliability in the information presented by the company.
Investments are defined as the group that comprises the accounts that record investments in shares, quotas or social interest parts, securities, commercial papers or any other negotiable document acquired by the economic entity on a temporary or permanent basis, for the purpose of maintain a secondary reserve of liquidity, establish economic relationships with other entities or to comply with legal or regulatory provisions.
Investments represented in shares and in shares or shares of social interest are recorded at their historical cost.
Other investments, such as bonds, cédulas, certificates, etc., will be accounted for at their nominal value. However, in the event of differences between the latter and the historical cost, in order not to violate the basic accounting standards of «valuation or measurement», such differences will be controlled through auxiliary accounts complementary to the investment, specifically in the titles in which the difference occurs.
For this purpose, the items Discount to be Amortized or Premium to be Amortized will be used.
The historical cost includes the amounts incurred for the purchase of the investment, which, in the case of investments represented in shares and quotas or parts of social interest, will be adjusted monthly or annually, recognizing the inflationary effect in accordance with what provided for in current legal provisions.
When the economic entity has as its main activity that of capital rentier, at the time of selling its investments it must debit account 6150 - Financial Activity. If said investments are made in the development of secondary activities, when the sale value is greater than the book value, the difference will be credited to account 4240 - Income from the sale of investments -; but if the value of the sale is less, it will be charged to the respective provision account.
If the provision does not exist or is insufficient, the balance must be debited to subaccount 531005 - Sale of Investments. When investments are held in subordinate companies, in respect of which the economic entity has the power to arrange for their profits to be transferred in the following period, they must be accounted for under the equity method, in accordance with current legal provisions.
Audit objectives
General objectives
The design of tests that provide reasonable assurance that:
1. The investments were authorized, exist and are property of the company on the date of the Balance Sheet.
2. All the investments that the company owns are included in the balances of the corresponding accounts.
3. The values with which the investments are presented in the Financial Statements are correct and duly disclosed.
4. Income from investments with gains and losses on sales and adjustments in evaluation margins included, are adequately reflected in the Financial Statements.
5. Investments are correctly classified according to their short and long term components.
6. Generally Accepted Accounting standards are followed.
7. Investment items are recognized in the corresponding unit of measurement.
Specific objectives
1. Obtain certainty of the reality of the registered values.
2. Determine the collection of investment accounts.
3. Verify that adequate investment planning and analysis has been carried out.
4. Obtain information about the most representative investment transactions in relation to the procedures.
5. Determine the efficiency and effectiveness of the company's investment methods.
6. Establish compliance with investment policies
Investments must have a great control on the part of financial managers, since these are the ones that in a moment can give the organization a contribution of important resources
Audit program
To validate the information that the company provides with respect to investments, the following audit program is established, developing the points described below:
1. Review and evaluate the strength and / or weaknesses of the Internal Control system and based on said evaluation:
- Perform compliance tests and determine the extent and timing of the applicable audit procedures according to the circumstances Prepare a memorandum or report with the result of the work, the conclusions reached and the comments on the strength and / or weaknesses of the control internal, which require immediate action or may be appropriate points for our recommendation letter.
2. Plan and carry out substantive tests of the figures shown in the financial statements and that are necessary according to the circumstances.
Compliance testing
A. Verify the existence and application of an investment access policy.
B. Determine the efficiency of the company's investment acquisition policy
C. Verify that the supports of the accounts registered as investments are in order and in accordance with the legal provisions.
D. Observe if credits on account of investments are properly recorded.
E. Check that there is a complete investment management analysis to identify failures and apply the necessary corrections
F. Check if the information about the investments of the company is duly updated and is sent to the administration and those in charge within the company in a timely manner.
G. Verify the existence of a manual of functions of the personnel in charge of investment accounts.
H. Verify the knowledge and compliance with the manual of functions by the employees.
Substantive tests
A. Check the physical existence of the titles that prove the ownership of the investments.
B. Ensure the correct accounting and valuation of investments in accordance with generally accepted accounting principles, applied on a uniform basis in relation to the previous period.
C. Verify the adequate presentation in the financial statements and reveal any encumbrance that exists on said investments.
D. Check how the products or losses from investments were accounted for and their inclusion in the statements for the period.
E. Through confirmations, verify the balances of the investments that the company maintains in other entities.
F. Verify the adjustments made to the investments due to their appreciation in the market.
G. Determine the dividend policy required by market valuations.
Audit procedures
1. Verify the authorization and ownership through the investigation technique that the investments made have been duly authorized by the financial manager.
2. Obtain written verification of the entities involved in the respective investments made.
3. Carry out an analytical review of the Financial Statements to confirm that all the investments are contained in them.
4. Verify if the evaluation base is applied consistently, in accordance with the policy approved by the board of directors
5. Through the technique of reprocessing transactions, verify that they are correctly registered.
6. Ratify the basic evaluation statement through the recomputing technique.
7. Evaluate the cut of documents to determine if the investments are valued correctly.
8. Check that all movements in investment are reflected in the Financial Statements.
9. Verify that the interests, dividends and others to which the investments have given rise are recorded clearly and in accordance with GAAP
10. If any of the investments has been sold, verify that the price of said transaction has been authorized by the Board of Directors
