1.5       Query

Verification of Investments – Treatment in Accounts.

(1)        The company has been holding shares of various bodies corporate in its name and directors have authorized these investments.  However in the books of accounts there are not shown any investments.

(2)        On an inquiry I have been told that these shares were not in actual the properties of the company so far as they have been held by the company in the capacity of a nominee of another individual.

(3)        From the record there is nothing evident to show that the shares have been held by the company in its capacity of a nominee.

(4)        The consideration for the purchase of the investments has been moved by an individual as for whose behalf the company acts as a nominee.

Under the circumstances, I shall thank you to enlighten me as to the reports I should make to the directors as well as to the shareholders.  Would a qualified report stating this fact to the shareholders absolve me from the responsibility of verifying the investments, since from the face of the accounts, investments are difficult to be vouched?

                                                   Opinion                                                         January 30, 1962

The following answer is bases on the assumption that the Company is not engaged in the business of acting as a nominee company to hold investments and other securities as a trustee or agent on behalf of other persons.  In view of this, it is necessary for the auditor to qualify his report by a clear statement of fact pointing out that the investments have not been verified by him as they are held on behalf of a third person and are as a consequence not shown in the books of account.  If any of the investments so held are partly-paid, the contingent liability in respect of such investments should also be shown in such accounts of the company, as the latter being the registered holder will be fastened with the liability.

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