Question 1

Fraud Risks.
List potential fraud schemes related to long-lived assets.

Accepted Answer

∙ Overstatement of assets through overva

Question 2

Repairs and maintenance.
Assume that an auditor determines that a client's policy related to recording repairs and maintenance is reasonable, but the auditor has concerns about whether the policy is adhered to. What might cause such concerns and how will the auditor adjust the substantive procedures to be performed?

Accepted Answer

Some clients might be motivated to recor

Question 3

The auditor would be most likely review the depreciation policy and test depreciation calculations to satisfy the auditor about the valuation of long-lived assets.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following factors is not an inherent risk factor related to asset impairment?

Accepted Answer

A)  Management is normally not interested in identifying and writing down assets. 
B)  Sometimes management wants to write down every potentially impaired asset to a minimum realizable value. 
C)  Determining asset impairment requires a good information system, a systematic process, goods controls, and professional judgment. 
D)  All of the above are inherent risk factors. 
A)  Management is normally not interested in identifying and writing down assets. 
B)  Sometimes management wants to write down every potentially impaired asset to a minimum realizable value. 
C)  Determining asset impairment requires a good information system, a systematic process, goods controls, and professional judgment. 
D)  All of the above are inherent risk factors.

Question 5

If no control deficiencies are identified, how will the extent of substantive testing required differ from a setting where deficiencies in internal control were identified?

Accepted Answer

A)  The extent of testing will be more. 
B)  The extent of testing will be less. 
C)  The extent of testing will be the same in the two settings. 
D)  The extent of testing is not affect by control deficiencies. 
A)  The extent of testing will be more. 
B)  The extent of testing will be less. 
C)  The extent of testing will be the same in the two settings. 
D)  The extent of testing is not affect by control deficiencies.

Question 6

For intangible assets, controls should be designed to do which of the following?

Accepted Answer

A)  Identify and account for intangible asset impairments. 
B)  Develop amortization schedules that reflect the remaining useful life of patents or copyrights associated with the asset. 
C)  Provide reasonable assurance that decisions are appropriately made as to when to capitalize or expense research and development expenditures. 
D)  All of the above. 
A)  Identify and account for intangible asset impairments. 
B)  Develop amortization schedules that reflect the remaining useful life of patents or copyrights associated with the asset. 
C)  Provide reasonable assurance that decisions are appropriately made as to when to capitalize or expense research and development expenditures. 
D)  All of the above.

Question 7

Which of the following procedures is not a substantive procedure used for testing the valuation of long-lived assets?

Accepted Answer

A)  Assess management's impairment estimates. 
B)  Inquire of management about assets that are idle. 
C)  Develop an independent estimate of amortization expense. 
D)  All of the above are procedures used for testing the valuation assertion. 
A)  Assess management's impairment estimates. 
B)  Inquire of management about assets that are idle. 
C)  Develop an independent estimate of amortization expense. 
D)  All of the above are procedures used for testing the valuation assertion.

Question 8

The existence of fair value estimates that are unreasonable or unsupportable is indicative of a potential fraud scheme.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following expense accounts is associated with natural resources?

Accepted Answer

A)  Depreciation expense. 
B)  Amortization expense. 
C)  Depletion expense. 
D)  Capitalization expense. 
A)  Depreciation expense. 
B)  Amortization expense. 
C)  Depletion expense. 
D)  Capitalization expense.

Question 10

Which of the following expense accounts is associated with intangible assets with a definite life?

Accepted Answer

A)  Depletion expense. 
B)  Depreciation expense. 
C)  Amortization expense. 
D)  None of the above. 
A)  Depletion expense. 
B)  Depreciation expense. 
C)  Amortization expense. 
D)  None of the above.

Question 11

Limited physical access to long-lived assets is a typical internal control that affects multiple assertions for long-lived assets.

Accepted Answer

A) True 
 B)False

Question 12

Which one of the following does not constitute a probable relationship between accounts?

Accepted Answer

A)  Equipment and depreciation. 
B)  Patent and amortization. 
C)  Assets under capital leases and amortization. 
D)  Oil reserves and depreciation. 
A)  Equipment and depreciation. 
B)  Patent and amortization. 
C)  Assets under capital leases and amortization. 
D)  Oil reserves and depreciation.

Question 13

An inherent risk related to long-lived assets is the incomplete recording of disposals.

Accepted Answer

A) True 
 B)False

Question 14

It is not important for an organization to have controls to track the location, quantity, condition, maintenance, and deprecation status of their long-lived assets as the external auditor gathers evidence related to these issues.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following controls is not a typical control that affects multiple assertions for long-lived assets?

Accepted Answer

A)  Reviewing insurance policies for adequate replacement coverage of assets. 
B)  Formal budgeting process with appropriate follow-up variance analysis. 
C)  Periodic comparison of physical assets to subsidiary records with the general ledger. 
D)  Periodic reconciliations of subsidiary records with the general ledger. 
A)  Reviewing insurance policies for adequate replacement coverage of assets. 
B)  Formal budgeting process with appropriate follow-up variance analysis. 
C)  Periodic comparison of physical assets to subsidiary records with the general ledger. 
D)  Periodic reconciliations of subsidiary records with the general ledger.

Question 16

Control Risks.
What are some typical controls that affect multiple assertions for long-lived assets?

Accepted Answer

∙ Formal budgeting process with appropri

Question 17

Which one of the following approaches does not represent how the auditor will become aware of risks associated with long-lived assets?

Accepted Answer

A)  Obtaining knowledge of the client business. 
B)  Reviewing the business plan related to major acquisitions. 
C)  Reviewing the minutes of board of directors' meetings. 
D)  All represent how the auditor will become aware of risks associated with long-lived assets and related expenses. 
A)  Obtaining knowledge of the client business. 
B)  Reviewing the business plan related to major acquisitions. 
C)  Reviewing the minutes of board of directors' meetings. 
D)  All represent how the auditor will become aware of risks associated with long-lived assets and related expenses.

Question 18

Once the auditor obtains a fixed asset additions schedule from the client, the first audit procedure to perform is to test the existence of recorded additions.

Accepted Answer

A) True 
 B)False

Question 19

Changes in the depreciable lives of equipment may be identified through a substantive audit procedure that includes analyzing depreciation expense as a percent of assets.

Accepted Answer

A) True 
 B)False

Question 20

When the value of a long-lived asset has been impaired, the organization must write down the asset reflecting the decline in economic benefit of the asset.

Accepted Answer

A) True 
 B)False

Fraud Risks. List potential fraud schemes related to long-lived assets.

The auditor would be most likely review the depreciation policy and test depreciation calculations to satisfy the auditor about the valuation of long-lived assets.

Which of the following factors is not an inherent risk factor related to asset impairment?

If no control deficiencies are identified, how will the extent of substantive testing required differ from a setting where deficiencies in internal control were identified?

For intangible assets, controls should be designed to do which of the following?

Which of the following procedures is not a substantive procedure used for testing the valuation of long-lived assets?

The existence of fair value estimates that are unreasonable or unsupportable is indicative of a potential fraud scheme.

Which of the following expense accounts is associated with natural resources?

Which of the following expense accounts is associated with intangible assets with a definite life?

Limited physical access to long-lived assets is a typical internal control that affects multiple assertions for long-lived assets.

Which one of the following does not constitute a probable relationship between accounts?

An inherent risk related to long-lived assets is the incomplete recording of disposals.

It is not important for an organization to have controls to track the location, quantity, condition, maintenance, and deprecation status of their long-lived assets as the external auditor gathers evidence related to these issues.

Which of the following controls is not a typical control that affects multiple assertions for long-lived assets?

Control Risks. What are some typical controls that affect multiple assertions for long-lived assets?

Which one of the following approaches does not represent how the auditor will become aware of risks associated with long-lived assets?

Once the auditor obtains a fixed asset additions schedule from the client, the first audit procedure to perform is to test the existence of recorded additions.

Changes in the depreciable lives of equipment may be identified through a substantive audit procedure that includes analyzing depreciation expense as a percent of assets.

When the value of a long-lived asset has been impaired, the organization must write down the asset reflecting the decline in economic benefit of the asset.

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

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

Fraud Risks. List potential fraud schemes related to long-lived assets.

The auditor would be most likely review the depreciation policy and test depreciation calculations to satisfy the auditor about the valuation of long-lived assets.

Which of the following factors is not an inherent risk factor related to asset impairment?

If no control deficiencies are identified, how will the extent of substantive testing required differ from a setting where deficiencies in internal control were identified?

For intangible assets, controls should be designed to do which of the following?

Which of the following procedures is not a substantive procedure used for testing the valuation of long-lived assets?

The existence of fair value estimates that are unreasonable or unsupportable is indicative of a potential fraud scheme.

Which of the following expense accounts is associated with natural resources?

Which of the following expense accounts is associated with intangible assets with a definite life?

Limited physical access to long-lived assets is a typical internal control that affects multiple assertions for long-lived assets.

Which one of the following does not constitute a probable relationship between accounts?

An inherent risk related to long-lived assets is the incomplete recording of disposals.

It is not important for an organization to have controls to track the location, quantity, condition, maintenance, and deprecation status of their long-lived assets as the external auditor gathers evidence related to these issues.

Which of the following controls is not a typical control that affects multiple assertions for long-lived assets?

Control Risks. What are some typical controls that affect multiple assertions for long-lived assets?

Which one of the following approaches does not represent how the auditor will become aware of risks associated with long-lived assets?

Once the auditor obtains a fixed asset additions schedule from the client, the first audit procedure to perform is to test the existence of recorded additions.

Changes in the depreciable lives of equipment may be identified through a substantive audit procedure that includes analyzing depreciation expense as a percent of assets.

When the value of a long-lived asset has been impaired, the organization must write down the asset reflecting the decline in economic benefit of the asset.

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