Question 1

Much of the inherent risk related to long-lived assets is due to the importance of management estimates.

Accepted Answer

A) True 
 B)False

Question 2

A common technique used to fraudulently misstate financial statements involves the understatement of long-lived assets through undervaluing existing long-lived assets.

Accepted Answer

A) True 
 B)False

Question 3

An inherent risk associated with intangible assets such as a patent is the accounting for research and development costs

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A)  Reconcile physical inventory with the property ledger. 
B)  Periodically reassess the appropriateness of depletion categories. 
C)  Identify obsolete or scrapped equipment and write it down to scrap value. 
D)  Periodically review management strategy and systematically assess the impairment of assets. 
A)  Reconcile physical inventory with the property ledger. 
B)  Periodically reassess the appropriateness of depletion categories. 
C)  Identify obsolete or scrapped equipment and write it down to scrap value. 
D)  Periodically review management strategy and systematically assess the impairment of assets.

Question 5

Which of the following are not included in a fixed-asset ledger?

Accepted Answer

A)  List of all the assets. 
B)  Estimated useful life. 
C)  Salvage value. 
D)  All the above are included. 
A)  List of all the assets. 
B)  Estimated useful life. 
C)  Salvage value. 
D)  All the above are included.

Question 6

Auditors do NOT need to know the business and economics of the business in order to perform meaningful preliminary analytical procedures.

Accepted Answer

A) True 
 B)False

Question 7

For integrated audits, the auditor will test the operating effectiveness of important controls as of the client's year end.

Accepted Answer

A) True 
 B)False

Question 8

The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal. This audit steps primarily tests which of the following assertions for the equipment account?

Accepted Answer

A)  Existence. 
B)  Presentation and disclosure. 
C)  Rights. 
D)  Valuation. 
A)  Existence. 
B)  Presentation and disclosure. 
C)  Rights. 
D)  Valuation.

Question 9

The risk of material misstatement related to the existence of long-lived assets at Client A is considered low, while this risk at Client B is considered high. Sufficiency of evidence for testing the existence of equipment would be higher for client B.

Accepted Answer

A) True 
 B)False

Question 10

If the auditor is performing substantive procedure to determine whether the long-lived asset balance is reflected on the balance sheet in the noncurrent section, which of the following assertions is being tested?

Accepted Answer

A)  Existence. 
B)  Completeness. 
C)  Presentation and Disclosure. 
D)  Rights and Obligations. 
A)  Existence. 
B)  Completeness. 
C)  Presentation and Disclosure. 
D)  Rights and Obligations.

Question 11

Knowledge of industry product trends is crucial to the auditor's identification of the potential for the impairment of assets.

Accepted Answer

A) True 
 B)False

Question 12

The auditor's procedures should include a determination as to whether tangible assets have reasonable useful lives.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following procedures is not a fraud-related audit procedure used to respond to identified fraud risk factors?

Accepted Answer

A)  Physically inspect tangible assets, including major additions, and agree serial numbers with invoices or other supporting documents. 
B)  Use the work of a specialist for asset valuations, including impairments. 
C)  Confirm the terms of significant additions of property or intangibles with other parties involved in the transaction. 
D)  All of the above are fraud-related audit procedures. 
A)  Physically inspect tangible assets, including major additions, and agree serial numbers with invoices or other supporting documents. 
B)  Use the work of a specialist for asset valuations, including impairments. 
C)  Confirm the terms of significant additions of property or intangibles with other parties involved in the transaction. 
D)  All of the above are fraud-related audit procedures.

Question 14

Which of the following actions is not a potential fraud scheme related to long-lived assets?

Accepted Answer

A)  Impairment losses on long-lived assets are not recognized. 
B)  Costs that should have been expenses are improperly capitalized. 
C)  Amortization of intangible assets is miscalculated. 
D)  All the above are potential fraud schemes. 
A)  Impairment losses on long-lived assets are not recognized. 
B)  Costs that should have been expenses are improperly capitalized. 
C)  Amortization of intangible assets is miscalculated. 
D)  All the above are potential fraud schemes.

Question 15

If control deficiencies related to long-lived assets are identified, the auditor will automatically assess those deficiencies as significant deficiencies.

Accepted Answer

A) True 
 B)False

Question 16

An auditor should compare the unaudited financial statements with both past results and industry trends to gain an indication about the possibility of fraud.

Accepted Answer

A) True 
 B)False

Question 17

An auditor's review of the repair expense to identify any capital expenditures is a test related to which management assertion?

Accepted Answer

A)  Existence 
B)  Completion 
C)  Valuation 
D)  Rights and Obligation 
A)  Existence 
B)  Completion 
C)  Valuation 
D)  Rights and Obligation

Much of the inherent risk related to long-lived assets is due to the importance of management estimates.

A common technique used to fraudulently misstate financial statements involves the understatement of long-lived assets through undervaluing existing long-lived assets.

An inherent risk associated with intangible assets such as a patent is the accounting for research and development costs

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

Which of the following are not included in a fixed-asset ledger?

Auditors do NOT need to know the business and economics of the business in order to perform meaningful preliminary analytical procedures.

For integrated audits, the auditor will test the operating effectiveness of important controls as of the client's year end.

The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal. This audit steps primarily tests which of the following assertions for the equipment account?

The risk of material misstatement related to the existence of long-lived assets at Client A is considered low, while this risk at Client B is considered high. Sufficiency of evidence for testing the existence of equipment would be higher for client B.

If the auditor is performing substantive procedure to determine whether the long-lived asset balance is reflected on the balance sheet in the noncurrent section, which of the following assertions is being tested?

Knowledge of industry product trends is crucial to the auditor's identification of the potential for the impairment of assets.

The auditor's procedures should include a determination as to whether tangible assets have reasonable useful lives.

Which of the following procedures is not a fraud-related audit procedure used to respond to identified fraud risk factors?

Which of the following actions is not a potential fraud scheme related to long-lived assets?

If control deficiencies related to long-lived assets are identified, the auditor will automatically assess those deficiencies as significant deficiencies.

An auditor should compare the unaudited financial statements with both past results and industry trends to gain an indication about the possibility of fraud.

An auditor's review of the repair expense to identify any capital expenditures is a test 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

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

Much of the inherent risk related to long-lived assets is due to the importance of management estimates.

A common technique used to fraudulently misstate financial statements involves the understatement of long-lived assets through undervaluing existing long-lived assets.

An inherent risk associated with intangible assets such as a patent is the accounting for research and development costs

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

Which of the following are not included in a fixed-asset ledger?

Auditors do NOT need to know the business and economics of the business in order to perform meaningful preliminary analytical procedures.

For integrated audits, the auditor will test the operating effectiveness of important controls as of the client's year end.

The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal. This audit steps primarily tests which of the following assertions for the equipment account?

The risk of material misstatement related to the existence of long-lived assets at Client A is considered low, while this risk at Client B is considered high. Sufficiency of evidence for testing the existence of equipment would be higher for client B.

If the auditor is performing substantive procedure to determine whether the long-lived asset balance is reflected on the balance sheet in the noncurrent section, which of the following assertions is being tested?

Knowledge of industry product trends is crucial to the auditor's identification of the potential for the impairment of assets.

The auditor's procedures should include a determination as to whether tangible assets have reasonable useful lives.

Which of the following procedures is not a fraud-related audit procedure used to respond to identified fraud risk factors?

Which of the following actions is not a potential fraud scheme related to long-lived assets?

If control deficiencies related to long-lived assets are identified, the auditor will automatically assess those deficiencies as significant deficiencies.

An auditor should compare the unaudited financial statements with both past results and industry trends to gain an indication about the possibility of fraud.

An auditor's review of the repair expense to identify any capital expenditures is a test 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