Ch 13 HW

Analysis of which account is least likely to reveal evidence relating to recorded retirement of equipment? -Property, plant, and equipment. -Accumulated depreciation. -Insurance expense. -Purchase returns and allowances.

Purchase returns and allowances.

Which of the following accounts should be reviewed by the auditors to gain reasonable assurance that additions to property, plant, and equipment are not understated? -Repairs. -Cash. -Accounts Payable. -Depreciation

Repairs

Audit of which of the following accounts is most likely to reveal evidence relating to recorded retirements of equipment? -Cost of goods sold. -Purchase returns and allowances. -Accumulated depreciation. -Purchase discounts.

Accumulated depreciation.

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. -Checks issued in payment of purchases of equipment are not signed by the controller. -Proceeds from sales of fully depreciated equipment are credited to other income. -Factory equipment replacements are generally made when estimated useful lives, as indicated in depreciation schedules, have expired.

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

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. -Closing statement. -Interest expense. -Canceled checks.

Deed.

The auditors may conclude that depreciation charges are insufficient by noting: -Continuous trade-ins of relatively new assets. -Excessive recurring losses on assets retired. -Insured values greatly in excess of book values. -Large amounts of fully depreciated assets.

Excessive recurring losses on assets retired.

The auditors are most likely to seek information from the plant manager with respect to the: -Existence of obsolete machinery. -Adequacy of the provision for uncollectible accounts. -Appropriateness of physical inventory observation procedures. -Deferral of procurement of certain necessary insurance coverage.

Existence of obsolete machinery.

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? -Valuation. -Rights. -Completeness. -Existence.

Existence.

To strengthen internal control over the custody of heavy mobile equipment, the client would most likely institute a policy requiring a periodic: -Verification of liens, pledges, and collateralizations. -Increase in insurance coverage. -Accounting for work orders. -Inspection of equipment and reconciliation with accounting records.

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? -The estimated remaining useful lives of plant assets were revised upward. -Plant assets were retired during the year. -The prior year's depreciation expense was erroneously understated. -Overhead allocations were revised at year-end.

Plant assets were retired during the year.

A search for overstated property, plant, and equipment purchases would most likely include: -Repairs and maintenance expense. -Accounts receivable. -Property, plant, and equipment. -Purchase discounts.

Property, plant, and equipment.

An effective procedure for identifying unrecorded retirements of equipment is to: -Foot related property records. -Select items of equipment and then locate them in the accounting records. -Recalculate depreciation on the related equipment. -Select items of equipment in the accounting records and then locate them in the plant.

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. -Test computation of depreciation provisions for a representative number of units. -Perform analytical procedures. -Compare rates used in the current year with those used in prior years.

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 accounts is on: -Performing analytical procedures on beginning balances of the accounts. -Transactions that occurred during the year. -Tests of controls over disposals. -All transactions resulting in the ending balance.

Transactions that occurred during the year.

To assure accountability for fixed-asset retirements, management should implement an internal control that includes: -Periodic observation of plant assets by the internal auditors. -Utilization of serially numbered retirement work orders. -Continuous analysis of miscellaneous revenue to locate any cash proceeds from the sale of plant assets. -Periodic inquiry of plant executives by internal auditors as to whether any plant assets have been retired.

Utilization of serially numbered retirement work orders.

The audit of intangible assets typically involves -Vouching the cost of assets -Testing allocation methods

Yes, Yes

Which of the following statements is not typical of property, plant, and equipment as compared to most current asset accounts? -Property, plant, and equipment accounts typically have a higher dollar value. -The assets involved with property, plant, and equipment ordinarily have relatively longer lives. -A property, plant, and equipment cutoff error near year-end has a more significant effect on net income. -Relatively few transactions occur in property, plant, and equipment during the year.

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