The Signet Corporation management is transferring securities across their held-to maturity, trading, and available-for-sale portfolios. Within the industry, management has the reputation of being aggressive, both in operating the business and in securities trading. In prior years, income from investments has exceeded 10 percent of reported earnings.

Required:

Identify, and explain the motive for, the key questions an auditor must ask to judge whether management's accounting for financial instruments is appropriate.