Exam 19: Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

The most effective and efficient audit approach in the examination of the income statement would be which of the following?

You are auditing the acquisition and payment cycle and note the presence of excessive recurring losses on retired assets.You may conclude that:

The estimated unpaid obligations for services or benefits that have been received before the balance sheet date are:

In the audit of accrued property taxes, the two most important balance-related audit objectives are completeness and accuracy.

The starting point for the verification of current-year acquisitions of property, plant, and equipment is normally a client-prepared schedule of all acquisitions recorded in the general ledger during the year.

State four of the seven specific balance-related audit objectives for property, plant, and equipment additions and, for each objective, describe one common test of details of balances.

One very useful method of auditing depreciation is to use an analytical procedure to test for reasonableness.

The approach to auditing patents and copyrights is similar to that used for property, plant, and equipment accounts.

The auditor is testing for unrecorded retirements/disposals of equipment.Which of the following audit procedures would the auditor most likely use?

When auditing disposals of property, plant, and equipment, the search for unrecorded disposals is essential.State the four audit procedures frequently used for verifying disposals.

When the auditor is determining whether the client followed a consistent depreciation policy from period to period, and the client's depreciation calculations are correct, the balance-related audit objective of ________ is being determined for depreciation expense.

One of the auditor's primary objectives when auditing manufacturing equipment is completeness.

Ordinarily, if you are auditing a continuing client, it is unnecessary to test the accuracy objective or the classification objective for fixed assets acquired in prior years.

The auditor needs to gain reasonable assurance that the equipment accounts in the fixed asset master file are not understated.Which of the following accounts would most likely be reviewed in making that determination?

Which of the following audit tests both have the effect of simultaneously verifying balance sheet and income statement accounts?

When performing the test of details of balances, the balance-related audit objective of classifications is closely related to the objective of:

Normally it may be unnecessary to examine supporting documentation for each addition to property, plant, and equipment, but it would be customary to verify:

The primary characteristic that distinguishes property, plant, and equipment from inventory, prepaid expenses, and investments is the intention to use property, plant, and equipment as a part of the operations of the client's business over their expected life.

The auditor normally does not need to test the accuracy or classification of fixed assets recorded in prior periods if they are the continuing auditor because:

When auditing acquisitions of property, plant, and equipment, the auditor's review of lease and rental agreements most closely relate to the cutoff objective.