Reference no: EM131503897

Assignment

1. Watch the video at https://www.youtube.com/watch?v=GHHesANT6OM. Explain how companies and use swaps to mitigate interest rate risks. Support your work using scholarly articles from the library.

2. Thank you for your discussion about using derivatives for both speculation and hedging. In my experience speculation is an extremely risky way to use these derivatives. You mentioned differences between currency futures and forward contracts and that foreign currency contracts investors can use to hedge against risk. Kumar, Poornima, and Sudarsan (2017) investigated the role of foreign currency futures and the spot volatility before and after introducing currency futures in the market. Kumar et al. found less volatility between the pound and Euro relative to the rupee, but not in relation to the dollar. Kumar et al. concluded using futures is not effective in reducing spot volatility. What do you think? If this tool is not effective why do investors use it?

Class,What are your thoughts? Do you believe foreign currency futures are effective in reducing risk?

3. Explore and discuss as a team the "Forward and Futures Contracts" video.

Discuss the Forward and Future Video with your class here. You must substantively participate to earn points.

4. Thank you for your post about interest rate swaps and the role they play in risk management! You said interest rates swaps have become increasing important in foreign exchange. Although these securities provide some positive benefits, they are not without problems. In my experience speculation and use for shady deals is a problem. Funk and Hirschman (2014) asserted financial derivatives are some of the most innovative tools for firms engaged in foreign exchange, but they undermined the separation of commercial and investment banking interests during the financial crisis. Funk and Hirschman further noted swaps disrupted the regulatory status quo and shifted the regulatory burden to the parities involved in these transactions. What do you think? Are interest rate swaps a help or a hindrance in foreign exchange markets?

Class,

What are your thoughts? How do interest rate sways help the parties that trade these securities and how do they hinder the success of regulatory bodies?

5. Explain characteristics that make audit evidence persuasive and adequate to support an audit opinion. Provide good examples.

6. How does an auditor learn and understand internal controls? No one knows internal controls better than the staff utilizing them. What about technology specific controls? How does an auditor gain the knowledge to conduct model validation of the internal control systems? How can they be sure that they conducted the audit effectively and thoroughly? Thoughts anyone?

7. When reviewing a process or controls would we have different objectives than in say a financial audit? Does an operation audit have different objectives than a compliance audit? Thoughts anyone?

8. Great thoughts. If we consider each characteristic what about auditors direct knowledge? How does audit firms account for direct knowledge? Can you train someone on internal controls? What about product specific knowledge in internal controls? What about industry specific financial audits? Retail is very different from banking or service companies. How does the auditor support industry specific knowledge? Thoughts anyone?

9. I really like your posting. The objective of an audit would certainly drive the direction and quality of the audit. With the different types of audits, how would the objective clarify the points of the audit? How would it drive the outline and test points? What about the quality? Thoughts anyone?