Exam 14: Auditing the Financinginvesting Process: Prepaid Expenses, Intangible Assets, and Property, Plant, and Equipment

In an interview with the plant manager regarding operations, the auditor is most likely to obtain evidence that raises concerns regarding:

The purchase of capital assets should be consistent with the authorization table used by the entity to approve such transactions. However, no such table is normally used for lease transactions.

Disposition of capital assets through sale, exchange, retirement, or abandonment are transactions that occur in the property management process.

In the examination of property, plant, and equipment, the auditor tries to determine all of the following except the:

In testing plant and equipment balances, an auditor may inspect new additions listed on the analysis of plant and equipment. This procedure is designed to obtain evidence concerning management's assertion(s)about:

Auditors can usually gather sufficient, competent evidence on prepaid insurance by performing substantive analytical procedures. Why is this?

Due to a weakness observed in internal control over recording retirements of equipment, the auditor may decide to:

Substantive analytical procedures should not be used in the audit of property, plant, and equipment.

Testing depreciation calculations for a sample of property, plant, and equipment tests the assertion of:

Which of the following questions would an auditor least likely include on an internal control questionnaire concerning the initiation and execution of equipment transactions?

How do accounting standards regarding accounting for the impairment or disposal of long-lived assets affect the audit of property, plant, and equipment?

There are a number of important disclosure items to consider when auditing the property management process. List two. Where in the financial statements can some of the disclosures relating to property, plant, and equipment be found?

Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account?

Which of the following audit procedures would be least likely to lead the auditor to find unrecorded fixed asset disposals?

An auditor analyzes repairs and maintenance accounts primarily to obtain evidence in support of the audit assertion that all:

Identify the types of transactions that occur in the property management process.

If the ratio of repairs and maintenance expense to property, plant, and equipment is higher than expected, which of the following is a plausible explanation?

The property, plant, and equipment records function should be segregated from the custodial function.

Match each of the following intangible assets with its proper general category. -Patented IT program

For each of the following tests, state whether it is a test of details of account balances or a test of details of transactions. Then note for which property management assertion the test provides evidence. 1. Test depreciation calculations for a sample of capital assets 2. For assets written off, test amounts charged against income and accumulated depreciation 3. Physically examine the capital asset additions 4. Vouch transactions included in repairs and maintenance for items that should be capitalized 5. Vouch significant additions and dispositions to vendor invoices or other supporting documentation 6. Examine or confirm deeds or title documents for proof of ownership