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

Natural resource companies cannot reassess the amount of reserves even if more information becomes available during the course of mining, harvesting, or extracting resources.

A client has implemented a policy requiring the establishment and enforcement of property management training for all personnel involved in the use, stewardship, and management of equipment. Which of the following is not a test that could be used in testing the control?

Auditors must employ independent geologists to evaluate management's estimate of the reserves contained in a new discovery of natural resources.

Asset impairment is not typically assessed by the independent auditor since it is a subjective management estimate.

Assume that the audit team notes the client has made a significant change in its product line which requires that new equipment be purchased. Which of the following would be of greatest concern to the auditor?

Audit procedures should be proportional to which of the following?

It is simple for auditors to test the costs capitalized for discovery of natural resources because only successful efforts may be recorded

If unusual or unexpected relationships related to long-lived assets are identified during preliminary analytical procedures, the planned audit procedures (tests of controls, substantive procedures) would be adjusted to address the risk of material misstatement.

An auditor is required to gain an overall understanding of internal controls related to long-lived assets for integrated audits, but NOT for financial statement only audits.

After a natural resource such as gas or coal is used up by the client, the client is responsible for restoring the land to its original condition. What is the cost of this restoration called?

The auditor typically makes a physical inspection of most of the material fixed asset acquisitions.

If preliminary analytical procedures identify some unexpected relationships, the auditor would conclude that there may be a heightened risk of material misstatements.

When an organization disposes of a long-lived asset it should determine and record the gain or loss on the disposal of the asset.

Which of the following is not a technique that auditors can use when performing preliminary analytical procedures related to long-lived assets?

Which of the following is not a circumstance indicating potential impairment of intangible assets?

When planning the audit procedures related to long-lived assets, the auditor is required to perform preliminary analytical procedures.

Audit firms should NOT customize the audit programs based on the assessment of the risk of material misstatement when auditing long-lived assets.

Which of the following items is not used by natural resource companies to estimate the asset value of natural resources over the life of the resource,e.g., oil or coal?

Which of the following procedures is a substantive procedure that relates to the rights and obligations assertion?

To identify any possible impairment of manufacturing equipment, the auditor can tour the facility during operations to determine if any of the machines are idle.