Auditing Chapter 13

In testing plant and equipment balances, an auditor may select recorded additions in the analysis of plant and equipment and inspect the actual asset(s) involved. Which management assertion is this procedure most directly related to?

Existence

The auditors are most likely to seek information from the plant manager with respect to the

Existence of obsolete machinery

To strengthen internal control over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic:

Inspection of equipment and reconciliation with accounting records

Which of the following explanations most likely would satisfy an auditor who questions management about significant debits to the accumulated depreciation accounts?

Plant assets were retired during the year

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

Excessive recurring losses on assets retired

Treetop Corporation acquired a building and arranged mortgage financing during the year. Verification of the related mortgage acquisition costs would be least likely to include an examination of the related:

Deed

Which of the following statements is NOT typical of property, plant, and equipment as compared to most of current assets accounts?

A property, plant, and equipment cutoff error near year-end has a more significant effect on net income

Audit of which of the following accounts is most likely to reveal evidence relating to recorded retirement of equipment?

Accumulated depreciation

Which of the following is an internal control weakness related to the factory equipment?

All purchases of factory equipment are required to be made by the department in need of the equipment

A search for overstated property, plant, and equipment purchases would most likely include

Property, plant and equipment

Analysis of which account is LEAST likely to reveal evidence relating to recorded retirement of equipment?

Purchase returns and allowances

Which of the following accounts should be reviewed by the auditors to gain reasonable assurance that additions to property, plan and equipment are NOT understated?

Repairs

An effective procedure for identifying unrecorded retirements of equipment is to:

Select items of equipment in the accounting records and then locate them in the plant

Which of the following is NOT an overall test of the annual provision for depreciation expense?

Test deductions from accumulated depreciation for assets purchased during the year

For the audit of a continuing nonpublic client, the emphasis of the testing for property account is on:

Transactions that occurred during the year

To use accontability for fixed asset retirements, management should implement an internal control that includes:

Utilization of serially numbered retirement work orders

The audit of intangible assets typically involves

Vouching the Cost of Asset (yes), Testing Allocation Methodes(yes)