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

In testing plant and equipment balances, an auditor examines new additions listed on an analysis of plant and equipment. This procedure most likely obtains evidence concerning management's assertion of

Which of the following accounts would most likely be reviewed by the auditor to gain reasonable assurance that additions to property, plant, and equipment are not understated?

Inquiry of entity personnel and a review of lease transactions for the same period can provide evidence on proper cutoff for capital leases.

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

The auditor is most likely to seek information from the plant manager with respect to the

When there are numerous property and equipment transactions during the year, an auditor planning to set control risk at low usually plans to obtain an understanding of internal control and to perform

Tennessee Company violated company policy by erroneously capitalizing the cost of painting its warehouse. The CPA examining Tennessee's financial statements would most likely learn of this error by

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?

Auditors will examine the insurance register primarily to

In performing a search for unrecorded retirements of fixed assets, an auditor most likely would

Generally, auditors rely on controls when auditing the property management function and therefore less substantive testing is used.

In auditing intangible assets, an auditor most likely would review or recompute amortization and determine whether the amortization period is reasonable in support of management's financial statement assertion of

Inherent risk for prepaid expenses would generally be assessed as low because these accounts do not usually include complex transactions.

An example of a prepaid account is prepaid interest.

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

The controller of Excello Manufacturing, Inc., wants to use ratio analysis to identify the possible existence of idle equipment or the possibility that equipment has been disposed of without having been written off. Which of the following ratios would best accomplish this objective?

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

Which of the following situations has the best chance of being detected when a CPA compares revenues and expenses reported for the year being audited (current year) with the prior year and investigates all changes exceeding a fixed percentage?

Prepaid expenses provide economic benefit for longer than a year.

Which of the following is the best evidence of real estate ownership at the balance sheet date?