Question 1

Long-lived assets only include the tangible assets of an organization.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following controls is not a typical internal control over intangible assets?

Accepted Answer

A)  Procedures to provide reasonable assurance that decisions are appropriately made as to when to capitalize or expense research and development expenditures. 
B)  Development of amortization schedules that reflect the remaining useful life of patents or copyrights associated with the assets. 
C)  Procedures to identify and account for intangible asset impairment. 
D)  All of the above are typical controls for intangible assets. 
A)  Procedures to provide reasonable assurance that decisions are appropriately made as to when to capitalize or expense research and development expenditures. 
B)  Development of amortization schedules that reflect the remaining useful life of patents or copyrights associated with the assets. 
C)  Procedures to identify and account for intangible asset impairment. 
D)  All of the above are typical controls for intangible assets. D

Question 3

The auditor selects entity-wide controls for testing, but NOT transaction controls specific to long-lived assets.

Accepted Answer

A) True 
 B)False  False

Question 4

The tour of the manufacturing plant may best assist the auditor in determining which of the following?

Accepted Answer

A)  Whether all purchases are authorized. 
B)  Whether any machinery is inoperative in the production cycle. 
C)  Management's strategy for assessing impairment. 
D)  Estimates of depreciation expense. 
A)  Whether all purchases are authorized. 
B)  Whether any machinery is inoperative in the production cycle. 
C)  Management's strategy for assessing impairment. 
D)  Estimates of depreciation expense.

Question 5

Brown, Inc. obtained a patent for its product five years ago and should expense the entire amount of the unamortized balance if the product is no longer sold.

Accepted Answer

A) True 
 B)False

Question 6

Which statement is true?

Accepted Answer

A)  Management is always reluctant to write down asset values. 
B)  Intangible assets do not require effective controls because they have low inherent risk. 
C)  Complex ownership structures may create challenges in the recording of assets. 
D)  The incomplete recording of asset disposals understates the asset balance. 
A)  Management is always reluctant to write down asset values. 
B)  Intangible assets do not require effective controls because they have low inherent risk. 
C)  Complex ownership structures may create challenges in the recording of assets. 
D)  The incomplete recording of asset disposals understates the asset balance.

Question 7

The auditor performs substantive procedures related to property, plant and equipment to determine if the assets have been pledged as collateral or title has transferred. What is the primary assertion the auditor is testing?

Accepted Answer

A)  Valuation. 
B)  Rights. 
C)  Completeness. 
D)  Existence. 
A)  Valuation. 
B)  Rights. 
C)  Completeness. 
D)  Existence.

Question 8

Which of the following assertions are usually the two most relevant assertions related to long-lived assets?

Accepted Answer

A)  Existence and Presentation. 
B)  Completeness and Existence. 
C)  Existence and Valuation. 
D)  Valuation and Completeness. 
A)  Existence and Presentation. 
B)  Completeness and Existence. 
C)  Existence and Valuation. 
D)  Valuation and Completeness.

Question 9

The client should have methods in place to identify and account for intangible-asset impairments.

Accepted Answer

A) True 
 B)False

Question 10

When performing preliminary analytical procedures related to long-lived assets, which of the following should the auditor compare the unaudited financial statements with?

Accepted Answer

A)  Past results. 
B)  Industry trends. 
C)  Future company projections. 
D)  Both A and B. 
A)  Past results. 
B)  Industry trends. 
C)  Future company projections. 
D)  Both A and B.

Question 11

Audit approach for leases.
Describe the substantive procedures typically used to test leases.

Accepted Answer

General substantive procedures for lease

Question 12

Which of the following statement is true?

Accepted Answer

A)  Intangible assets should be recorded at fair market value. 
B)  Intangible assets should be recorded at cost. 
C)  Intangible assets should be recorded at future market value. 
D)  Intangible assets should not be recorded. 
A)  Intangible assets should be recorded at fair market value. 
B)  Intangible assets should be recorded at cost. 
C)  Intangible assets should be recorded at future market value. 
D)  Intangible assets should not be recorded.

Question 13

Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets?

Accepted Answer

A)  Make client inquiries. 
B)  Examine property tax records. 
C)  Send confirmations to insurance agents. 
D)  Examine scrap sales accounts. 
A)  Make client inquiries. 
B)  Examine property tax records. 
C)  Send confirmations to insurance agents. 
D)  Examine scrap sales accounts.

Question 14

Asset impairment.
Describe what is meant by asset impairment and explain where inherent risks related to asset impairment stems from.

Accepted Answer

asset impairment deals with management's

Question 15

Which statement is true about a company's choice of capitalization policy?

Accepted Answer

A)  All assets with a useful life of more than one year must be capitalized. 
B)  The company's policy must meet the minimum capitalization amounts established by GAAP. 
C)  The company's policy is determined relative to materiality and the cost of maintaining asset records. 
D)  The company may elect to capitalize operating expenses which exceed the minimum threshold for asset capitalization. 
A)  All assets with a useful life of more than one year must be capitalized. 
B)  The company's policy must meet the minimum capitalization amounts established by GAAP. 
C)  The company's policy is determined relative to materiality and the cost of maintaining asset records. 
D)  The company may elect to capitalize operating expenses which exceed the minimum threshold for asset capitalization.

Question 16

Auditors often recalculate the present value of capital lease agreements to assess whether the relevant criteria for capitalizing the lease have been met.

Accepted Answer

A) True 
 B)False

Question 17

Which is the primary assertion tested in conjunction with obtaining evidence regarding impairment?

Accepted Answer

A)  Valuation. 
B)  Cutoff. 
C)  Existence. 
D)  Rights. 
A)  Valuation. 
B)  Cutoff. 
C)  Existence. 
D)  Rights.

Question 18

Which of the following long-lived assets presents the most difficult in determining its cost?

Accepted Answer

A)  Equipment. 
B)  Inventory. 
C)  Patent. 
D)  All the above are equally difficult in determining cost. 
A)  Equipment. 
B)  Inventory. 
C)  Patent. 
D)  All the above are equally difficult in determining cost.

Question 19

Relevant assertions for long-lived assets
List the five management assertions relevant for long-lived assets and explain how each one is relevant.

Accepted Answer

A. Existence or occurrence- The long-liv

Question 20

Reconciling the physical asset inventory with the property ledger on a periodic basis is a control related to which management assertion?

Accepted Answer

A)  Completeness. 
B)  Rights and Obligations. 
C)  Existence. 
D)  Valuation 
A)  Completeness. 
B)  Rights and Obligations. 
C)  Existence. 
D)  Valuation

Long-lived assets only include the tangible assets of an organization.

Which of the following controls is not a typical internal control over intangible assets?

The auditor selects entity-wide controls for testing, but NOT transaction controls specific to long-lived assets.

The tour of the manufacturing plant may best assist the auditor in determining which of the following?

Brown, Inc. obtained a patent for its product five years ago and should expense the entire amount of the unamortized balance if the product is no longer sold.

Which statement is true?

The auditor performs substantive procedures related to property, plant and equipment to determine if the assets have been pledged as collateral or title has transferred. What is the primary assertion the auditor is testing?

Which of the following assertions are usually the two most relevant assertions related to long-lived assets?

The client should have methods in place to identify and account for intangible-asset impairments.

When performing preliminary analytical procedures related to long-lived assets, which of the following should the auditor compare the unaudited financial statements with?

Audit approach for leases. Describe the substantive procedures typically used to test leases.

Which of the following statement is true?

Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets?

Asset impairment. Describe what is meant by asset impairment and explain where inherent risks related to asset impairment stems from.

Which statement is true about a company's choice of capitalization policy?

Auditors often recalculate the present value of capital lease agreements to assess whether the relevant criteria for capitalizing the lease have been met.

Which is the primary assertion tested in conjunction with obtaining evidence regarding impairment?

Which of the following long-lived assets presents the most difficult in determining its cost?

Relevant assertions for long-lived assets List the five management assertions relevant for long-lived assets and explain how each one is relevant.

Reconciling the physical asset inventory with the property ledger on a periodic basis is a control related to which management assertion?

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

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Exam 12: Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Long-lived assets only include the tangible assets of an organization.

Which of the following controls is not a typical internal control over intangible assets?

The auditor selects entity-wide controls for testing, but NOT transaction controls specific to long-lived assets.

The tour of the manufacturing plant may best assist the auditor in determining which of the following?

Brown, Inc. obtained a patent for its product five years ago and should expense the entire amount of the unamortized balance if the product is no longer sold.

Which statement is true?

The auditor performs substantive procedures related to property, plant and equipment to determine if the assets have been pledged as collateral or title has transferred. What is the primary assertion the auditor is testing?

Which of the following assertions are usually the two most relevant assertions related to long-lived assets?

The client should have methods in place to identify and account for intangible-asset impairments.

When performing preliminary analytical procedures related to long-lived assets, which of the following should the auditor compare the unaudited financial statements with?

Audit approach for leases. Describe the substantive procedures typically used to test leases.

Which of the following statement is true?

Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets?

Asset impairment. Describe what is meant by asset impairment and explain where inherent risks related to asset impairment stems from.

Which statement is true about a company's choice of capitalization policy?

Auditors often recalculate the present value of capital lease agreements to assess whether the relevant criteria for capitalizing the lease have been met.

Which is the primary assertion tested in conjunction with obtaining evidence regarding impairment?

Which of the following long-lived assets presents the most difficult in determining its cost?

Relevant assertions for long-lived assets List the five management assertions relevant for long-lived assets and explain how each one is relevant.

Reconciling the physical asset inventory with the property ledger on a periodic basis is a control related to which management assertion?

Auditing: Integral to the Economy

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditors

Professional Liability, Auditor Judgment Frameworks, and Professional Responsibilities

Professional Auditing Standards and the Audit Opinion Formulation Process

A Framework for Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Debt Obligations and Stockholders Equity Transactions

Activities Required in Completing a Quality Audit

Audit Reports on Financial Statements

Advanced Topics Concerning Complex Auditing Judgments

Other Services Provided by Audit Firms

Filters