As a result of highly profitable operations over a number of years, Eastern Manufacturing Corporation accumulated a substantial investment portfolio. In his examination of the financial statements for the year ended December 31, 19X0, the following information came to the attention of the Corporation's CPA:

1. The manufacturing operations of the corporation resulted in an operating loss for the year.

2. In 19X0, the corporation placed the securities making up the investment portfolio with a financial institution which will serve as custodian of the securities. Formerly, the securities were kept in the corporation's safe deposit box in the local bank.

3. On December 22, 19X0, the corporation sold and then repurchased on the same day a number of securities that had appreciated greatly in value. Management stated that the purpose of the sale and repurchases was to establish a higher cost and book value for the securities and to avoid the reporting of a loss for the year.

Required:

a. List the objectives of the CPA's examination of the investment account.

b. Under what conditions would the CPA accept a confirmation of the securities on hand from the custodian in lieu of inspecting and counting the securities himself?

c. What disclosure, if any, of the sale and repurchase of the securities would the CPA recommend for the financial statements?