When a client engages in transactions involving derivatives, the auditor should:

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Here is the solution for When a client engages in transactions involving derivatives, the auditor should:. The solution is given after the options.

When a client engages in transactions involving derivatives, the auditor should:

Develop an understanding of the economic substance of each derivative.

Confirm with the client’s broker whether the derivatives are for trading purposes.

Notify those charged with governance about the risks involved in derivative transactions.

Add an explanatory paragraph to the auditor’s report describing the risks associated with each derivative.

Correct Answer

Develop an understanding of the economic substance of each derivative.

Explanation:

Develop an understanding of the economic substance of each derivative. is the answer for When a client engages in transactions involving derivatives, the auditor should:

Conclusion:

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