What it is
The audit of investments rests on three things: that the securities exist and belong to the entity, that fair value is supported by the right level of evidence, and that income and gains are recorded and classified correctly. Custodian confirmation handles the first, and the fair value hierarchy drives the work on the second.
The program covers custodian and broker confirmation, pricing and the Level 1, 2 and 3 hierarchy, net asset value practical expedient, impairment of debt securities, dividend and interest accrual, derivatives, restricted and pledged investments, and disclosures. Steps carry an assertion, sample-size note, W/P reference and sign-off.
When to use it
- Planning the audit of an entity with a securities portfolio, treasury investments or an endowment.
- When any holdings are valued with unobservable inputs or at net asset value.
- To document reliance on a custodian and the work on pricing.
What’s inside
- Existence, rights and completeness: custodian and broker confirmations, ownership and pledges
- Valuation and the fair value hierarchy, including NAV and specialists
- Income, gains and losses, classification and impairment
- Derivatives, disclosure and presentation, with tie-outs and general procedures
Standard cited
This template follows AU-C 330 / AU-C 501 / ASC 320 / ASC 321 / ASC 820. It is written in our own words, except for phrases the standard requires the document to contain, with [bracketed placeholders] for client details, amounts in USD and dates as MM/DD/YYYY. Check it against the current standard and your firm’s methodology before use. See AU-C 330 explained, AU-C 501 explained.
Questions
Is a custodian confirmation enough for existence?
For securities held at a third-party custodian it is the primary evidence. Confirm all accounts, including those closed in the year. If the custodian has a service auditor report, you can evaluate it for the controls, but the confirmation still addresses balances at the date (AU-C 505, AU-C 402).
How is Level 3 fair value tested?
Understand management’s model and inputs, test the data, develop an independent estimate or use a specialist, and evaluate the disclosure of significant unobservable inputs (AU-C 540, AU-C 620, ASC 820-10-50).
What about investments valued at net asset value?
Investments in funds measured at net asset value as a practical expedient are not in the fair value hierarchy but are disclosed. Test by obtaining the fund’s audited financial statements and confirming the NAV, and evaluate whether adjustments are needed for the date and for the fund’s own estimates.
Related templates
- Audit Program: Cash and Bank
- Confirmation Control Log (AU-C 505)
- Disclosure Checklist: Leases (ASC 842) and Revenue (ASC 606), Short Form
- Audit Planning Memo (AU-C 300)
Last updated 11/05/2026. All free templates.