Exam 14: Auditing the Financing Investing Process: Prepaid Expenses Intangible Assets and Property Plant and Equipment

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. Test depreciation calculations for a sample of capital assets For assets written off, test amounts charged against income and accumulated depreciation Physically examine the capital asset additions Vouch transactions included in repairs and maintenance for items that should be capitalized Vouch significant additions and dispositions to vendor invoices or other supporting documentation Examine of confirm deeds or title documents for proof of ownership

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

To improve accountability for fixed asset retirements, management most likely would implement a system of internal control that includes

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

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

For each analytical procedure listed below, identify a potential misstatement in the property management accounts it could help find. a. Compute the ratio of depreciation expense to the related property, plant, and equipment accounts and compare to prior years' ratios b. Compare monthly or annual repairs and maintenance with previous years c. Compute ratio of insurance expense to the related property, plant, and equipment accounts and compare to prior years' ratios

By selecting a sample of additions to property, plant, and equipment and then examining the related vendor invoices, the auditor is testing which of the following assertions for property, plant, and equipment?

To achieve effective control over fixed asset additions, a company should establish activities that require

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

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

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

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

What tests do auditors typically perform on a lead schedule for property, plant, and equipment and what assertion are they testing?

Which of the following is likely the most effective audit procedure for the verification of the legal ownership of real property?

Recomputing the unexpired portion of insurance policies in effect tests which of the following assertions for prepaid insurance?

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

If an entity has few capital asset purchases, it will generally not have a formal control system over such transactions.

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

Substantive analytical procedures are commonly used to test prepaid accounts.

Which of the following constitutes a control weakness related to factory equipment?