Bluth Corporation, a manufacturing company, periodically invests large sums in marketable equity securities. The investment policy is established by the Risk & Investment Committee of the board of directors. The treasurer is responsible for carrying out the committee's directives. All securities are held by Bluth Corporation's brokerage company. Required: Develop one test of controls audit procedure for each of the following audit objective: 1. To validate whether an appropriate investment policy has been established at the right level in the organization. (3 marks) 2. To determine whether the treasurer was the only person carrying out the Risk & Investment Committee's mandate. (3 marks) 3. To evaluate the effectiveness of the physical security of the financial securities stored in the brokerage company's safe deposit box. (3 marks) As a part of completing the audit, an auditor needs to consider subsequent events. 1. Of the two types of subsequent event, describe the nature of Type I subsequent events. (1 mark) 2. What is management expected to do in case a Type I subsequent event occurs? (1 mark) 3. What is the auditor expected to do in case a Type 1 subsequent event occurs? (1 mark) Completing the Audit The following three events (Questions 14 through 16) occurred in independent cases. In each instance, the event happened after the close of the fiscal year under audit (December 31, 20X1), but before the financial statements were issued (which is also the audit report date). For each case, Determine whether the event is a Type I subsequent event or Type II subsequent event. Explain your answer (2 marks) Propose an appropriate audit procedure if you were asked to evaluate the appropriateness of the event (1 mark) Question 14 (4 points) On January 7, 20X2, the mineral content of a shipment of ore en route on December 31, 20X1 was determined to be 72%. The shipment was recorded at year-end at an estimated content of 50% by a debit to raw material inventory and a credit to accounts payable in the amount of $20,600. The final liability to the vendor is based on the actual mineral content of the shipment. On February 10, a contract was signed whereby Mammoth Enterprises purchased from the auditee all of the latter's capital assets (including rights to receive the proceeds of any property expropriation), inventories, and right to conduct business under the auditee corporation's name. The transfer's effective date will be March 1. The sale price was $500,000, subject to adjustment after a physical inventory count. Important factors contributing to the decision to enter into the contract were the policy of the board of directors of Mammoth Industries to diversify the firm's activities and the report of a survey conducted by an independent market appraisal firm, which revealed a declining market for the auditee's products. On January 3, 20X2 the provincial government approved construction of an expressway. The plan will result in the expropriation of land owned by the auditee. Construction will begin late next year. No estimate of the expropriation award is available