Ch 13 E

Recording repairs and maintenance expenses as property, plant, and equipment to overstate income is an example of

A misstatement of acquisitions.

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

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

The term "cruising" relates to the following industry:

Forestry

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

Existence of obsolete machinery.

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

Excessive recurring losses on assets retired.

Which of the following is not correct concerning plant assets.

Plant assets need to be tightly controlled to prevent defalcation

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

Purchase returns and allowances

An auditor has found many new assets on the plant floor, which coincides with an increase in the equipment subsidiary ledger. However, the auditor has noticed that lease payments are being made to an equipment leasing company. The auditor should primarily be concerned with which financial statement assertion?

Rights and obligations.

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.

In examining the miscellaneous revenue account, an auditor discovers income from plant assets. What should be a primary audit concern?

That such assets have been removed from the ledger of property owned.

Which of the following is a risk of a related party transaction in regards to property, plant, and equipment?

The asset may be overstated on the balance sheet.

An expenditure to acquire property, plant, and equipment to be added to an asset account is known as

a capital expenditure

Which factors increase the risk of misstatement in regards to property, plant, and equipment?

all of the above: personel, manuals, targets

An examination of lease agreements is necessary to determine

both existence rights owndership of assets, and valuation of assets

If a lease conveys title to the lessee at the end of the lease, the lease is probably

capital lease - none of the above