ch 13 hw/qz

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

Excessive recurring losses on assets retired.

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.

Which of the following is not correct concerning plant assets?

Plant assets need to be tightly controlled to prevent defalcation.

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.

Which of the following statements is least likely to be correct concerning intangible assets?

Proper presentation as current assets.

When comparing an initial financial statement audit with a subsequent year audit for a particular client, the scope of audit procedures for which of the following accounts would be expected to decrease the most?

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, plant, and equipment are not understated?

Repairs

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

Accumulated depreciation.

When performing an audit of the property, plant, and equipment accounts, an auditor should expect which of the following to be most likely to indicate a departure from generally accepted accounting principles?

A gain was recognized on the sale of a fixed asset in which the book value exceeded the proceeds received for the sale.

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

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

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

Transactions that occurred during the year.

The auditors are least likely to learn of retirements of equipment through which of the following?

Review of the purchase returns and allowances account

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.

Obtain direct knowledge that the inventory exists and has been properly counted.

Tests of transactions during the year

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.

To assure accountability for fixed asset retirements, management should implement an internal control that includes:

Utilization of serially numbered retirement work orders.

A major piece of land that the company has recently purchased for expansion has been found to contain toxic levels of pollutants. The auditor should be concerned with which financial statement assertion?

Valuation

In analyzing the plant assets account, which assertion is the examination of repairs and maintenance records most directly related to?

Valuation