Question 1

Which of the following is used to obtain evidence that the client's equipment accounts are not understated?

Accepted Answer

A) Analyzing repairs and maintenance expense accounts. 
B) Vouching purchases of plant and equipment. 
C) Recomputing depreciation expense. 
D) Analyzing the miscellaneous revenue account. 
A) Analyzing repairs and maintenance expense accounts. 
B) Vouching purchases of plant and equipment. 
C) Recomputing depreciation expense. 
D) Analyzing the miscellaneous revenue account. A

Question 2

In testing for unrecorded retirements of equipment,an auditor might:

Accepted Answer

A) Analyze miscellaneous revenue. 
B) Compare depreciation expense with the prior year's depreciation expense. 
C) Trace equipment items observed during the plant tour to the equipment subsidiary ledger. 
D) Scan the general journal for unusual equipment retirements. 
A) Analyze miscellaneous revenue. 
B) Compare depreciation expense with the prior year's depreciation expense. 
C) Trace equipment items observed during the plant tour to the equipment subsidiary ledger. 
D) Scan the general journal for unusual equipment retirements. A

Question 3

Even when internal control is weak,a significant portion of the audit work on property,plant,and equipment may be performed at an interim date.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following best describes the independent auditors' approach to obtaining satisfaction concerning depreciation expense in the income statement?

Accepted Answer

A) Verify the mathematical accuracy of the amounts charged to income as a result of depreciation expense. 
B) Determine the method for computing depreciation expense and ascertain that is in accordance with generally accepted accounting principles. 
C) Reconcile the amount of depreciation expense to those amounts credited to accumulated depreciation accounts. 
D) Establish the basis for depreciable assets and verify the depreciation expense. 
A) Verify the mathematical accuracy of the amounts charged to income as a result of depreciation expense. 
B) Determine the method for computing depreciation expense and ascertain that is in accordance with generally accepted accounting principles. 
C) Reconcile the amount of depreciation expense to those amounts credited to accumulated depreciation accounts. 
D) Establish the basis for depreciable assets and verify the depreciation expense.

Question 5

For which of the following ledger accounts would the auditor be most likely to analyze the details to identify understatements of equipment acquisitions?

Accepted Answer

A) Service Revenue. 
B) Sales. 
C) Repairs and maintenance expense. 
D) Sales salaries expense. 
A) Service Revenue. 
B) Sales. 
C) Repairs and maintenance expense. 
D) Sales salaries expense.

Question 6

When there are numerous property and equipment transactions during the year,an auditor who plans to assess control risk at a low level usually performs:

Accepted Answer

A) Tests of controls and extensive tests of property and equipment balances at the end of the year. 
B) Analytical procedures for current year property and equipment transactions. 
C) Tests of controls and limited tests of current year property and equipment transactions. 
D) Analytical procedures for property and equipment balances at the end of the year. 
A) Tests of controls and extensive tests of property and equipment balances at the end of the year. 
B) Analytical procedures for current year property and equipment transactions. 
C) Tests of controls and limited tests of current year property and equipment transactions. 
D) Analytical procedures for property and equipment balances at the end of the year.

Question 7

Which of the following is not a control that should be established for purchases of equipment?

Accepted Answer

A) Establishing a budget for capital acquisitions. 
B) Requiring that the department that ordered the equipment is the same that requested the equipment. 
C) Requiring that the receiving department receive the equipment. 
D) Establishing an accounting policy regarding the minimum dollar amount of purchase that will be considered for capitalization. 
A) Establishing a budget for capital acquisitions. 
B) Requiring that the department that ordered the equipment is the same that requested the equipment. 
C) Requiring that the receiving department receive the equipment. 
D) Establishing an accounting policy regarding the minimum dollar amount of purchase that will be considered for capitalization.

Question 8

Plant and equipment are not as inherently risky as are other assets,such as inventories and accounts receivable.However,a company should still endeavor to maintain effective internal control over plant and equipment.
a.Describe the principal purpose of internal controls relating to plant and equipment.
b.List and describe four major controls applicable to plant and equipment.

Accepted Answer

a.The principal purpose of internal cont

Question 9

The auditors' approach to the audit of property,plant,and equipment largely results from the fact that many transactions occur.

Accepted Answer

A) True 
 B)False

Question 10

In violation of company policy,Miller Company erroneously capitalized the cost of painting its warehouse.The auditors examining Miller's financial statements would most likely detect this when:

Accepted Answer

A) Discussing capitalization policies with Miller's controller. 
B) Examining maintenance expense accounts. 
C) Observing,during the physical inventory observation,that the warehouse had been painted. 
D) Examining the construction work orders supporting items capitalized during the year. 
A) Discussing capitalization policies with Miller's controller. 
B) Examining maintenance expense accounts. 
C) Observing,during the physical inventory observation,that the warehouse had been painted. 
D) Examining the construction work orders supporting items capitalized during the year.

Question 11

Which of the following would be least likely to address control over the initiation and execution of equipment transactions?

Accepted Answer

A) Requests for major repairs are approved by a higher level than the department initiating the request. 
B) Prenumbered purchase orders are used for equipment and periodically accounted for. 
C) Requests for purchases of equipment are reviewed for consideration of soliciting competitive bids. 
D) Procedures exist to restrict access to equipment. 
A) Requests for major repairs are approved by a higher level than the department initiating the request. 
B) Prenumbered purchase orders are used for equipment and periodically accounted for. 
C) Requests for purchases of equipment are reviewed for consideration of soliciting competitive bids. 
D) Procedures exist to restrict access to equipment.

Question 12

Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

Accepted Answer

A) Examination of correspondence with the corporate counsel concerning acquisition matters. 
B) Examination of ownership documents registered and on file at a public hall of records. 
C) Examination of corporate minutes and resolutions concerning the approval to acquire property,plant,and equipment. 
D) Examination of deeds and title guaranty policies on hand. 
A) Examination of correspondence with the corporate counsel concerning acquisition matters. 
B) Examination of ownership documents registered and on file at a public hall of records. 
C) Examination of corporate minutes and resolutions concerning the approval to acquire property,plant,and equipment. 
D) Examination of deeds and title guaranty policies on hand.

Question 13

A continuing audit client's property,plant,and equipment and accounts receivable accounts have approximately the same year-end balance.In this circumstance,when compared to property,plant and equipment,one would normally expect the audit of accounts receivable to require:

Accepted Answer

A) More audit time. 
B) Less audit time. 
C) Approximately the same amount of audit time. 
D) Similar confirmation procedures. 
A) More audit time. 
B) Less audit time. 
C) Approximately the same amount of audit time. 
D) Similar confirmation procedures.

Question 14

An auditor would be least likely to use confirmations in connection with the examination of

Accepted Answer

A) Inventories. 
B) Long-term debt. 
C) Property,plant,and equipment. 
D) Stockholders' equity. 
A) Inventories. 
B) Long-term debt. 
C) Property,plant,and equipment. 
D) Stockholders' equity.

Question 15

In the audit of depletion the auditors must often rely on the work of specialists.

Accepted Answer

A) True 
 B)False

Question 16

The auditors may use data analytics to help test repairs and maintenance expense for overstatement by:

Accepted Answer

A) Vouching  large repair and maintenance expenditures. 
B) Identifying expenditures with characteristics that indicate they are capital expenditures. 
C) Identifying capital expenditures that should have been expensed. 
D) Identifying expenditures for repairs and maintenance that were not performed. 
A) Vouching  large repair and maintenance expenditures. 
B) Identifying expenditures with characteristics that indicate they are capital expenditures. 
C) Identifying capital expenditures that should have been expensed. 
D) Identifying expenditures for repairs and maintenance that were not performed.

Question 17

When there are numerous property and equipment transactions during the year,an auditor planning to assess the risk of material misstatement at a low risk level must perform.

Accepted Answer

A) Tests of controls and extensive tests of property and equipment balances at the end of the year. 
B) Extensive tests of current year property and equipment transactions. 
C) Tests of controls and limited tests of current year property and equipment transactions. 
D) Analytical procedures for property and equipment balances at the end of the year. 
A) Tests of controls and extensive tests of property and equipment balances at the end of the year. 
B) Extensive tests of current year property and equipment transactions. 
C) Tests of controls and limited tests of current year property and equipment transactions. 
D) Analytical procedures for property and equipment balances at the end of the year.

Question 18

The most likely technique for the current year audit of goodwill which was acquired three years ago by a continuing audit client:

Accepted Answer

A) Confirmation. 
B) Observation. 
C) Recomputation. 
D) Inquiry. 
A) Confirmation. 
B) Observation. 
C) Recomputation. 
D) Inquiry.

Question 19

The auditors typically observe all major items of property,plant,and equipment every year.

Accepted Answer

A) True 
 B)False

Question 20

Material purchases of assets from an affiliated company should be disclosed in the financial statements.

Accepted Answer

A) True 
 B)False

Which of the following is used to obtain evidence that the client's equipment accounts are not understated?

In testing for unrecorded retirements of equipment,an auditor might:

Even when internal control is weak,a significant portion of the audit work on property,plant,and equipment may be performed at an interim date.

Which of the following best describes the independent auditors' approach to obtaining satisfaction concerning depreciation expense in the income statement?

For which of the following ledger accounts would the auditor be most likely to analyze the details to identify understatements of equipment acquisitions?

When there are numerous property and equipment transactions during the year,an auditor who plans to assess control risk at a low level usually performs:

Which of the following is not a control that should be established for purchases of equipment?

The auditors' approach to the audit of property,plant,and equipment largely results from the fact that many transactions occur.

In violation of company policy,Miller Company erroneously capitalized the cost of painting its warehouse.The auditors examining Miller's financial statements would most likely detect this when:

Which of the following would be least likely to address control over the initiation and execution of equipment transactions?

Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

A continuing audit client's property,plant,and equipment and accounts receivable accounts have approximately the same year-end balance.In this circumstance,when compared to property,plant and equipment,one would normally expect the audit of accounts receivable to require:

An auditor would be least likely to use confirmations in connection with the examination of

In the audit of depletion the auditors must often rely on the work of specialists.

The auditors may use data analytics to help test repairs and maintenance expense for overstatement by:

When there are numerous property and equipment transactions during the year,an auditor planning to assess the risk of material misstatement at a low risk level must perform.

The most likely technique for the current year audit of goodwill which was acquired three years ago by a continuing audit client:

The auditors typically observe all major items of property,plant,and equipment every year.

Material purchases of assets from an affiliated company should be disclosed in the financial statements.

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

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Exam 13: Property,plant,and Equipment: Depreciation and Depletion

Which of the following is used to obtain evidence that the client's equipment accounts are not understated?

In testing for unrecorded retirements of equipment,an auditor might:

Even when internal control is weak,a significant portion of the audit work on property,plant,and equipment may be performed at an interim date.

Which of the following best describes the independent auditors' approach to obtaining satisfaction concerning depreciation expense in the income statement?

For which of the following ledger accounts would the auditor be most likely to analyze the details to identify understatements of equipment acquisitions?

When there are numerous property and equipment transactions during the year,an auditor who plans to assess control risk at a low level usually performs:

Which of the following is not a control that should be established for purchases of equipment?

The auditors' approach to the audit of property,plant,and equipment largely results from the fact that many transactions occur.

In violation of company policy,Miller Company erroneously capitalized the cost of painting its warehouse.The auditors examining Miller's financial statements would most likely detect this when:

Which of the following would be least likely to address control over the initiation and execution of equipment transactions?

Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

A continuing audit client's property,plant,and equipment and accounts receivable accounts have approximately the same year-end balance.In this circumstance,when compared to property,plant and equipment,one would normally expect the audit of accounts receivable to require:

An auditor would be least likely to use confirmations in connection with the examination of

In the audit of depletion the auditors must often rely on the work of specialists.

The auditors may use data analytics to help test repairs and maintenance expense for overstatement by:

When there are numerous property and equipment transactions during the year,an auditor planning to assess the risk of material misstatement at a low risk level must perform.

The most likely technique for the current year audit of goodwill which was acquired three years ago by a continuing audit client:

The auditors typically observe all major items of property,plant,and equipment every year.

Material purchases of assets from an affiliated company should be disclosed in the financial statements.

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Audit Planning, understanding the Client, assessing Risks, and Responding

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Reports

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, operational, and Compliance Auditing

Filters