Chapter 13: Property, Plant, and Equipment: Depreciation and Depletion

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

Because of limited number of transactions, most of the audit work on plant, equipment, and intangibles can be done at ______. -interim before the year-end date -field work after the year-end date -the year-end date

-interim before the year-end date

A key control applicable to plant and equipment is a written company policy that distinguishes between __________(1) expenditures and __________(2) expenditures. (Enter only one word per blank.)

(1) capital (2) revenue

What factor(s) lead to a smaller proportion of total audit time on property, plant, and equipment compared to current assets? -Usually little change in the property accounts from year to year -High dollar value but few transactions -A proper cutoff of year-end transactions is of lesser importance -A year-end cutoff error will greatly impact net income for the year

-Usually little change in the property accounts from year to year -High dollar value but few transactions -A proper cutoff of year-end transactions is of lesser importance

Audit procedures for property, plant, and equipment typically performed at an interim date 2 months before year-end include ______. -an impairment test of intangible assets -tests of depreciation expense as of year-end -considering internal control over property, plant, and equipment -an analysis of acquisitions for the first 10 months of the year

-considering internal control over property, plant, and equipment -an analysis of acquisitions for the first 10 months of the year

When auditing property, plant, and equipment, auditors also gather evidence on the related accounts of ______ expense -office -depreciation -repairs and maintenance -amortization

-depreciation -repairs and maintenance

Due to the complexity in determining the basis for depletion for mining and oil and gas, auditors most often use ______. -specialists such as mining engineers and geologists -the work of internal auditors -the amounts that were used in the prior year's audit

-specialists such as mining engineers and geologists

The key audit working paper for property, plant, and equipment is ______. -tests of depreciation -a summary analysis of assets and accumulated depreciation accounts -an analysis of current year's additions and retirements -an analysis of repairs and maintenance accounts

-a summary analysis of assets and accumulated depreciation accounts

Intangible assets ______. -may qualify as current assets -lack physical substance -provide rights or economic advantages -are nonmonetary

-lack physical substance -provide rights or economic advantages -are nonmonetary

For the first audit of property, plant, and equipment for a company that has never been audited but has been in business for many years, auditors should thoroughly review all ______. -major additions to the property accounts since inception -all repairs and maintenance expense account transactions since inception -all depreciation expense account transactions since inception -major retirements to the property accounts since inception

-major additions to the property accounts since inception -major retirements to the property accounts since inception

For effective internal control over property, plant, and equipment, periodic physical inventories of plant assets should be compared with the ______. -ledger accounts for the plant assets -repairs and maintenance ledger accounts -budgets for acquisitions of plant assets -serially numbered work orders for acquisitions

-ledger accounts for the plant assets

Auditors need to perform a complete historical analysis of the property accounts for a client that has never been audited because ______. -asset additions may have been recorded in property accounts -repair and maintenance expenses may have been capitalized -retirements of property may have been credited to property accounts

-repair and maintenance expenses may have been capitalized

To test depreciation auditors may ______. -compare current year rates to prior years and investigate variances -look for excessive depreciation of fully depreciated assets -compare retirements for the current year to retirements for last year -compare accumulated depreciation credits with depreciation expense debits

-compare current year rates to prior years and investigate variances -look for excessive depreciation of fully depreciated assets -compare accumulated depreciation credits with depreciation expense debits

Which subgroup of property, plant, and equipment is subject to depreciation? -Land such as property used in the operation of the business -Buildings, machinery, equipment, and land improvements -Natural resources

-Buildings, machinery, equipment, and land improvements

Fences and parking lots are examples of __________(1) __________(2) which are subject to depreciation. (Enter only one word per blank.)

(1) land (2) improvements

To confirm their understanding of internal control over property, plant, and equipment, auditors will ______. -inspect serially numbered work orders -inspect the plant and equipment budget -observe segregation of duties over plant asset acquisitions -review the repairs and maintenance account for expenditures that should be capitalized

-inspect serially numbered work orders -inspect the plant and equipment budget -observe segregation of duties over plant asset acquisitions

The depletion of timberlands is usually based on physical quantities established by __________(1), a term that means the inspection of a tract of forestland for the purpose of estimating the total lumber yield. (Enter only one word per blank.)

(1) cruising

If asset recovery periods are not reasonable, __________(1) expense may be materially misstated and the auditors will not be in a position to issue an unqualified opinion on the financial statements. (Enter only one word per blank.)

(1) depreciation

The summary analysis of property, plant, and equipment emphasizes ______ under audit. -all changes during the year -balances as of the year-end -a sample of changes during the year

-all changes during the year

Variances between plant budgets and actual expenditures for plant assets should be subject to review and approval of ______. -internal audit -warehouse department -purchasing department -executives

-executives

Intangible assets tend to be difficult to audit because of all of the following factors except ______. -payments made to acquire assets can be reviewed -they lack physical substance -they are subject to amortization or impairment -their value lies in rights or economic advantages

-payments made to acquire assets can be reviewed

The audit of depreciation relates most directly to the audit objectives of ______. -valuation or allocation -existence or occurrence -presentation and disclosure -completeness

-valuation or allocation

Compared to PPE, auditors typically spend a larger proportion of audit time on ______. -current assets -stockholder's equity -current liabilities

-current assets

Auditors need to gather evidence regarding the presentation and disclosure of property, plant, and equipment including disclosure of ______. -related transactions -rights to property, plant, and equipment -depreciation methods

-depreciation methods

True or false: A typical analytical procedure for testing depreciation is to compute the ratio of depreciation expense to total expenses and compare it to last year. -True -False

-False

True or false: Some audit clients choose to maintain their depreciation records using federal income tax rules such as MACRS. This practice can lead to materially misstated depreciation expense. -True -False

-True

The approach typically used by auditors to audit depreciation is ______. -independently develop an estimate of the amount to compare to management's estimate -review subsequent events or transactions bearing on the estimate -review and test management's process of developing the estimate

-review and test management's process of developing the estimate

Key controls applicable to plant and equipment are ______. -use of capital works orders to record advance authorizations of all plant and equipment acquisitions -an annual plant budget used to forecast and control acquisitions and retirements -a policy requiring all purchase of plant and equipment to be handled by the warehouse department

-use of capital works orders to record advance authorizations of all plant and equipment acquisitions -an annual plant budget used to forecast and control acquisitions and retirements


Kaugnay na mga set ng pag-aaral

AP Biology In Class Final Review (Part 1)

View Set

Economics Chapter 12 Practice Questions

View Set

Newton's First Law Test (Physics)

View Set

Загальна патологія (екзамен-крок)

View Set