The Main Objectives of an Audit of Swaps

D

An audit of swaps refers to the examination of a company's rate swap transactions to evaluate their accuracy, validity, and compliance with applicable laws, regulations, and accounting principles. The primary objective of this audit is to ensure that swap transactions are properly recorded and reported in the financial statements and regulatory reports of the company. The audit aims to provide reasonable assurance that the company's swap activity is adequately controlled and managed, and that the financial information related to swaps is reliable and transparent.

Answer A - To determine the adequacy and effectiveness of controls relating to rate swap transactions This answer is partially correct. One of the objectives of an audit of swaps is to evaluate the adequacy and effectiveness of controls related to rate swap transactions. This includes assessing the design and implementation of controls, testing their operating effectiveness, and identifying any deficiencies or weaknesses that could impact the reliability and accuracy of swap transactions.

Answer B - To ascertain that swap transaction are properly recorded in accordance with their term This answer is also partially correct. Another objective of an audit of swaps is to ensure that swap transactions are properly recorded in accordance with their term. This involves examining the terms of the swap agreement, verifying that the transaction has been recorded accurately, and checking that the transaction is consistent with the company's policies and procedures.

Answer C - To ensure that the company's financial statements and regulatory reports properly reflect in accordance with generally accepted accounting principles, the results of swap activity This answer is also partially correct. One of the main objectives of an audit of swaps is to ensure that the company's financial statements and regulatory reports properly reflect the results of swap activity in accordance with generally accepted accounting principles (GAAP). This includes verifying that the financial statements and reports accurately reflect the valuation of the swaps, the income or expense associated with the swaps, and any related disclosures.

Answer D - All of these This answer is the correct choice as all the objectives mentioned in answers A, B, and C are relevant to an audit of swaps. The audit aims to evaluate the adequacy and effectiveness of controls related to swap transactions, verify the accuracy and validity of swap transaction records, and ensure that financial statements and regulatory reports properly reflect the results of swap activity in accordance with GAAP. The ultimate goal of the audit is to provide reasonable assurance that the company's swap activity is effectively controlled and managed, and that the financial information related to swaps is reliable and transparent.