Repo Transactions Securities - Free Essay Example

Sample details Pages: 5 Words: 1410 Downloads: 1 Date added: 2017/06/26 Category Business Essay Type Narrative essay Did you like this example? Makeup Case ESM-17 Q. During the ESM congressional hearings, the auditors of ESMs major customers were questioned regarding the confirmation procedures they used for their clients transactions with ESM. What would be the key objective or objectives of an auditors confirmation procedures when a client has engaged in (a) repo transactions with a government securities broker and (b) reverse repo transactions with a government securities broker? What types of procedures would be used in auditing repo and reverse repo transactions? A. As an introduction, I would first like to define the term â€Å"repo transaction†. A repurchase agreement, or repo, can be described as a contract between a financial institution and an investor in which securities are sold and promised to be repurchased on a later specified date for a specified price. The transaction may be for either investing or financing depending on which side of the transaction is participated in. A rep urchase agreement is made when a financial institution (the seller-borrower) that sells the securities to an investor (the buyer-lender) and subsequently agrees to repurchase the securities back at the later specified date at the specified price. A reverse repurchase agreement is exactly the same thing, except from the opposite point of view. A reverse repo would from the buyers viewpoint instead of the sellers. In the preceding example, the investor would be considered to have made a reverse repo agreement, agreeing to purchase and subsequently sell the securities back at the later specified date at the specified price. Most repo agreements involve federal government securities such as Treasury bills and bonds, but may also be corporate or municipal obligations as well. Repo agreements are similar in arrangement to secured loans in that the buyer receives the securities as collateral to protect the buyer from default by the seller. The difference between the selling price and th e repurchase price represents the financial institutions interest for the use of investors capital. Although legal title passes from the seller to the buyer, coupon payments are paid directly to the seller even though the ownership of the securities rests with the buyer. Most repo agreements are between other depository institutions, brokers/dealers of securities, governments and retail customers. Maturities of repo agreements range from one day (overnight), short-term (up to 270 days), long-term (two years) or can be open-ended (no maturity date). The securities involved in the repo agreement can be physically delivered, placed with a third-party custodian, or retained (held) by the seller. When planning an audit of a client involved in repo agreements, the auditor should obtain reasonable assurance that focuses on balance-related audit objectives. When the client enters into a repo agreement, selling the securities and promising to repurchase them, at a later date this creat es a liability. The dominant balance-related audit objective in this case would be to check for completeness. Completeness involves checking that all of the amounts that should be included have in fact been included. The point here is to be sure that the client has recorded (included) all the appropriate amounts for the liability. The incentive for the client is to leave the liability off of the books. If the client enters into a reverse repo agreement, purchasing the securities and agreeing to resell them at a later date, an asset is created. The dominant balance-related audit objective in this case would be to check for existence. Existence involves checking to see if the amounts should actually be included. Key to this objective would be to be sure the client actually possesses the securities to be resold in their inventory. The incentive of the client is to create an asset that does not exist. An example of completeness and existence related to repo agreements is to obtain reaso nable assurance that the repos and reverse repos are properly identified, described, and disclosed; include all agreements; and are stated at appropriate amounts. Another example of existence is the securities purchased under reverse repos exist and are either on hand or are held in custody for the institution. Accuracy should also be considered by the auditor. Accuracy involves making sure that all included amounts are arithmetically correct. An example involving repo agreements would be to obtain reasonable assurance that interest expense or income and related balance sheet accounts are properly measured and recorded. Another example of accuracy would be the values at which the securities are reported are appropriate. Another balance-related audit objective that the auditor must consider is classification. Classification involves determining whether the accounts contain the correct items so that they can be appropriately presented and disclosed. An example related to repo ag reements would be to obtain reasonable assurance that repos accounted for as secured borrowings meet the criteria for secured borrowings, including the condition that the assets to be repurchased are the same as sold. Rights and obligations should be considered by the auditor. Rights involve making sure that the assets are legally owned before they can be included. Obligations deal with liabilities and must belong to the institution. An example related to repo agreements would be to obtain reasonable assurance that the institution has legal title or other rights to ownership for all recorded securities. In addition to balance-related audit objectives, the auditor should also consider presentation and disclosure-related audit objectives. Occurrence and rights and obligations involves whether disclosed events have occurred and are the rights and obligations of the institution. Whether all required disclosures have been included deals with completeness. Accuracy and valuation ref ers to whether the financial information is fairly presented and at appropriate amounts. Whether the financial statements and footnotes contain amounts that are appropriately classified, and whether the balance descriptions and related disclosures are understandable involves classification and understandability. Examples of these presentation and disclosure-related audit objectives are that repo agreements have been executed and are obligations of the institution, assets pledged as collateral for repo agreements are properly disclosed in the financial statements, recorded amounts include assets owned by the institution and the financial statements include all transactions for the period, and securities involved in repo agreements are properly described and related footnote disclosures are accurate. In determining the auditing procedures to be used in auditing repo agreements, the auditor should accumulate the appropriate audit evidence. The auditor should examine any repo agreeme nt documentation. Documents should be reviewed and the respective recording of the liability should be agreed to. The securities put up as collateral should be tested to determine if they are adequately identified and properly disclosed, and the descriptions and amounts match those in the subsidiary ledger. The auditor should seek confirmations regarding the amount and terms of all repo agreements with the respective securities dealers, investors, and institutions. The confirmations serve to provide evidence on their occurrence, terms, and the treatment of the securities, whether delivered to the buyer, held by a custodian, or retained by the seller. It should be noted that it is often impractical to determine the existence or location of securities that are delivered to the buyer. This does not indicate that the buyer will not be able to complete the transaction and should not concern the auditor. The auditor should however consider using addition procedures to assess the abilit y of the buyer to complete the transaction by reviewing the audited financial statements of the buyer, considering any regulatory requirements, and obtaining a report from the independent accountant of the buyer. The auditor should also review related party transactions. The review should review transactions recorded as sales transactions to determine potential unrecorded transactions. The review may find that a transaction involving a sale and a repurchase was in fact a repo and should be accounted for as financing. The auditor should be aware of transactions that are improperly recorded. The auditor should assess collateral risk. The reputation, financial condition and market presence of the buyer should be considered. The current market value of the collateral should be reviewed to determine if the collateral is sufficient in relation to the agreement. The auditor should also assess whether the repo agreement fits the criteria for a financing or sales transaction. The au ditor should also test fair value disclosures. Quoted market prices or prevailing interest rates of the same or similar securities should be considered to evaluate if the estimates are reasonable. Some additional procedures an auditor could use are a review of the board of directors minutes, testing whether approved securities dealers were used, and recomputation of gains or losses on reverse repo agreements. Don’t waste time! Our writers will create an original "Repo Transactions Securities" essay for you Create order

An Organizational Profile Of The United States Army

Running head: ORG PROFILE 1 2 2 ORG PROFILE An Organizational Profile of the United States Army: Katherine Bingley University of Louisville Dr. Bradley Carpenter ELFH 490 May 27, 2015 An Organizational Profile of the United States Army I have chosen to write about the United States Army for my Organizational profile. Not only was it extremely interesting to look at the organization that I love and how it functions, but it is the one business that I feel most comfortable with. The Army employs approximately 530,000 Active Duty Soldiers and 330,000 civilians, making it one of the largest, most powerful corporations in the world. Founded in 1775, it is one of the oldest businesses in the United States and is rich with history, symbolism, and structure (citation, year). The Army is so interesting to me because it has so many different lines of effort. Of course you have to train Soldiers to fight and win, but you also have to take care of the families, run a town, manage factories and hospitals, and provide education for the children. What other organization does this on such a large level? Even the other branches of the Armed Forces can?t compare to what the Arm y accomplishes on a daily basis. Structural Features Bolman and Deal (1997) stated that structural frames are goal oriented. The Army?s goal is simple, clear, concise and achievable; to win America?s wars. 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A Case of Convicted Rapists Free Essays

I read in this journal that research mainly by interviews with convicted sexual offenders and contrast groups is important in order to understand why and how sexual violence against women occurred (1). Because masculinity has been assumed to be superior, and knowledge reflects on male dominated universe reflecting the views of patriarchal beliefs, feminists need to study and understand the reality of sexually violent men (2, 3). I noted that there are numerous hindrances in determining number and characteristics of rapists because only the ‘classic’ and violent cases are reported. We will write a custom essay sample on A Case of Convicted Rapists or any similar topic only for you Order Now To counter this, research would require interviews with the group of unreported rapists but this would again place the researcher as an accomplice because of protecting the rapist’s identity (6, 7). Information acquired in therapy is unreliable due to prisoner’s mistrust of prison officials as they feel it might be used against them in a parole hearing (10-11). Traditional masculinity behaviour suggested the men would respond positively to a female interviewer and despite security risks, professional self took priority before the personal self in order to collect relevant data (12, 13). I understood that to get good data, a good working relationship, the use of non-threatening background information and long interviews was crucial (15). Rapport was necessary in creating trust, confidentiality and mutual respect and this appealed to even the hardcore felons who were ready to talk to a non-judgmental outsider if just to break prison monotony. While neutrality should not be portrayed as approval, disagreements can result in destruction of rapport and jeopardize future interviews. Opinion should be put forth candidly but carefully to leave the participant feeling positive about the interview (16-18). I learned that many prisoners present unique problems in regard to obtaining voluntary informed consent and mentioning that they were rapists would cause the men shame and embarrassment (19-21). Explanations on risks, safeguards and the prisoners’ rights were given as well as permission to confirm the validity of the interview data (23-25). Research showed that prisoners are prone to lying, fabrication and manipulation in order to better their chances of parole because their approval depends on staff researchers’ assessment. While some rapists admitted to raping, they played down their use of force, others did not believe their actions constituted rape and the rest completely denied any sexual contact with the victims and pleaded mistaken identity (27-28). I also noted that while cooperation from the State Department of Corrections and the prison staff was excellent, riots and lockups, scheduling mishaps, inmate transfers and absenteeism, electricity blackouts and the occasional lack of an interview room were some of the obstacles encountered while at times unfavourable weather and lack of air conditioning made the longer interviews almost unbearable (29-30). References Diana, s. (1990). A glimpse inside. Understanding sexual harassment: a study of convicted rapists. Rout ledge, New York. Â   How to cite A Case of Convicted Rapists, Papers