Ch 14 Audit

If the ratio of insurance expense to related property, plant, and equipment is higher than expected, which of the following is a plausible explanation?

PP&E insurance expense includes some expenses related to product liability insurance.

Prepaid expenses provide economic benefit for longer than a year.

false

In testing for unrecorded retirements of equipment, an auditor most likely would:

select items of equipment from the accounting records and then locate them during the plant tour.

When there are numerous property and equipment transactions during the year, an auditor planning to set control risk at low usually plans to obtain an understanding of internal control and to perform:

tests of controls and limited tests of current year property and equipment transactions.

In an interview with the plant manager regarding operations, the auditor is most likely to obtain evidence that raises concerns regarding:

the need to write-off equipment that has become obsolete

If the ratio of repairs and maintenance expense to property, plant, and equipment is higher than expected, which of the following is a plausible explanation?

An addition to a building was charged to repairs and maintenance expense.

The auditor is least likely to learn of retirement of equipment through which of the following?

Analyzing debits to the accumulated depreciation account.

Which of the following questions would an auditor least likely include on an internal control questionnaire concerning the initiation and execution of equipment transactions?

Are procedures in place to monitor and properly restrict access to equipment?

Which of the following audit procedures would be least likely to lead the auditor to find unrecorded fixed asset disposals?

Review of repairs and maintenance expense.

The auditor may conclude that depreciation charges are insufficient by noting:

excessive recurring losses on assets retired.

In testing plant and equipment balances, an auditor may inspect new additions listed on the analysis of plant and equipment. This procedure is designed to obtain evidence concerning management's assertion(s) about:

existence

The auditor is most likely to seek information from the plant manager with respect to the:

existence of obsolete machinery.