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

Reviewing capital budgets and comparing the amounts spent with amounts budgeted is an example of a substantive analytical procedure for auditing prepaid accounts.

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

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

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

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

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

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

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

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

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

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

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

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

Substantive analytical procedures are commonly used to test prepaid accounts.

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

Testing a sample of repairs and maintenance expense items to ensure that they were properly classified as repairs as opposed to property,plant,and equipment tests which of the following assertions for the repairs and maintenance expense account?

Assets no longer used in operations are accounted for in essentially the same manner as those used in operations.

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?