In verifying investing cycle balances a CPA recognizes that the following misstatements may occur or exist: A mathematical error is made in accruing…

In verifying investing cycle balances a CPA recognizes that the following misstatements may occur or exist:1.A mathematical error is made in accruing interest earned.2.A 25 percent common stock investment in an affiliated company is accounted for on the cost basis.3.Securities held by an outside custodian are in the treasurer’s name.4.Securities on hand at the beginning of the year are diverted to personal use in July and are replaced in December.5.An authorized purchase is recorded at cost, and the broker’s fee is expensed.6.Ten shares of stock reported to be on hand are missing.7.Marketable equity securities are reported at cost, which is above market.8.The schedule of marketable securities does not reconcile to the general ledger accounts.9.Gain on a sale of securities is reported net of taxes.10.Securities pledged as collateral on a bank loan are not disclosed.Requireda.Identify the substantive test that should detect each misstatement.b.For each test, indicate the financial statement assertion(s) to which it pertains.

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