Micro Detect Corporation was sued for securities fraud. It was alleged that the company deliberately overstated net income by failing to appropriately recognize losses on its trading securities. Following is the transcript of the testimony given by one of Micro Detect's expert witnesses, Professor Winston, in response to questioning by the company's attorney. Examine the testimony, and determine if any statement made by the professor is patently untrue. Develop a list of questions that an attorney for the plaintiff would want to use to cross examine the professor. Non-GAAP statements in the following testimony may be assumed to be correct; focus only on the assertions about accounting methods.

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QUESTION Professor, did Micro Detect realize a loss on its trading securities during the time period in question? ANSWER Absolutely not. The company continues to hold the securities that have declined in value. Realization would only occur when the securities are sold. Micro Detect has never sold any securities at less than their cost. QUESTION Would you mind telling the jury how these so-called "trading securities" should be accounted for? ANSWER Unsold trading securities should be valued at fair value, you know, and this is exactly what the company did. QUESTION So, then, it is your testimony that the assets in question were correctly valued? ANSWER Yes. QUESTION Now, I suspect that on cross-examination, the plaintiff's attorney is going to try to make a ANSWER big deal about how the company kept the balance sheet in balance, so to speak. Let's go ahead and anticipate their questioning and try to clarify now. Please explain to the jury the process that Micro Detect used to keep the balance sheet in balance. OK. When assets go down, something else must go down to offset, or keep the books in balance. There is an equation: assets = liabilities + equity. In this case, the company de- creased equity to offset the decreased trading security value.