GRANDFATHERED INVESTMENTS are Municipal bonds and equities acquired on or before August 7,1986, the effective date of changes in tax rates caused by the Tax Reform Act of 1986. These investments are not subject to the 5.1 % property-casualty insurance company proration tax.
CAPITAL ADEQUACY is a measure of the financial strength of a bank or securities firm, usually expressed as a ratio of its capital to its assets. For banks, there is now a worldwide capital adequacy standard, drawn up by the Basle Committee of the Bank for International Settlements. This ratio requires banks to have capital equal to 8 per cent of their assets.
AUDIT OBJECTIVE is when in obtaining evidence in support of financial statement assertions, the auditor develops specific audit objectives in light of those assertions. For example, an objective related to the completeness assertion for inventory balances is that inventory quantities include all products, materials, and supplies on hand.
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