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Auditing panies
OVERVIEW OF THE INDUSTRY   
ACCOUNTING PRINCIPLES AND PRACTICES   
(a) Valuation,   
(b) e Recognition,   
(c) Investment Transactions,   
(d) Foreign Currency,   
(e) Shareholder Distributions,   
(f) Equalization,   
(g) Brokerage/Services and Expense Offset Arrangements,   
(h) Reporting,   
RISK FACTORS AND AUDIT REACTION   
(a) Processing Environment, 
(b) Derivatives Transactions,   
TYPICAL TRANSACTIONS AND CONTROLS   
SUBSTANTIVE TESTS   
(a) Investments,   
(b) Investment e and Realized Gains,   
(c) Accruals and Expenses,   
(d) Taxes,   
(e) Capital Accounts,   
(f) Financial Highlights and Investment Portfolio,   
OVERVIEW OF THE INDUSTRY
An pany serves as a vehicle for investors with similar investment objectives to benefit from professional investment selection and management and diversification of investments without incurring the substantial costs that would be associated with smaller portfolio positions. The business of an pany consists of selling its capital shares to the public; investing the proceeds, principally in securities, in a manner that seeks to achieve its established investment objectives; and distributing to its shareholders e from, gains realized on sales of, its investments.
There are many different categories of panies: management panies, unit investment trusts, collective trusts, investment partnerships, certain separate accounts of panies, and offshore funds. Ownership in an pany is represented by units of ownership, such as shares or a partnership interest, to which proportionate shares assets can be attributed.
The management pany is the most dominant of the several types of panies. The discussion in this chapter is presented principally in terms of management panies registered with the Securities and mission (SEC) under the pany Act of 1940 (the 1940 Act), which predominate in the industry. However, the accounting principles and auditing