Question 1

Which of the following is not a substantive audit procedure for leases?

Accepted Answer

A) Obtain and read copies of lease agreements and develop a schedule of leases. 
B) Review relevant expense accounts and determine if there are entries related to leases. 
C) For all operating leases,determine that the client has recorded assets and lease obligations properly. 
D) Review the client's disclosure of lease obligations for compliance with GAAP. 
A) Obtain and read copies of lease agreements and develop a schedule of leases. 
B) Review relevant expense accounts and determine if there are entries related to leases. 
C) For all operating leases,determine that the client has recorded assets and lease obligations properly. 
D) Review the client's disclosure of lease obligations for compliance with GAAP.

Question 2

In assessing the fair value of Level 1 assets,the auditor can perform an analysis of the volume of trading activity as part of obtaining audit evidence.

Accepted Answer

A) True 
 B)False

Question 3

An inherent risk associated with intangible assets,such as a patent,is the accounting for research and development costs.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets?

Accepted Answer

A) Make client inquiries. 
B) Examine property tax records. 
C) Send confirmations to insurance agents. 
D) Examine scrap sales accounts. 
A) Make client inquiries. 
B) Examine property tax records. 
C) Send confirmations to insurance agents. 
D) Examine scrap sales accounts.

Question 5

Brown,Inc. ,obtained a patent for its product five years ago and should expense the entire amount of the unamortized balance if the product is no longer sold.

Accepted Answer

A) True 
 B)False

Question 6

The tour of the manufacturing plant may best assist the auditor in determining which of the following?

Accepted Answer

A) Whether all purchases are authorized. 
B) Whether any machinery is inoperative in the production cycle. 
C) Management's strategy for assessing impairment. 
D) Estimates of depreciation expense. 
A) Whether all purchases are authorized. 
B) Whether any machinery is inoperative in the production cycle. 
C) Management's strategy for assessing impairment. 
D) Estimates of depreciation expense.

Question 7

If no control deficiencies are identified,how will the extent of substantive testing required differ from a setting where deficiencies in internal control were identified?

Accepted Answer

A) The extent of testing will be more. 
B) The extent of testing will be less. 
C) The extent of testing will be the same in the two settings. 
D) The extent of testing is not affected by control deficiencies. 
A) The extent of testing will be more. 
B) The extent of testing will be less. 
C) The extent of testing will be the same in the two settings. 
D) The extent of testing is not affected by control deficiencies.

Question 8

Goodwill is the excess of the purchase price over the fair market values of the acquired company's tangible assets,identifiable intangible assets,and liabilities.

Accepted Answer

A) True 
 B)False

Question 9

The FASB standard on accounting for leases issued in 2016 requires most leases to be reported on the lessee's balance sheet,which is a significant change from the previous accounting requirements.

Accepted Answer

A) True 
 B)False

Question 10

As natural resources are used up,the client has to recognize which of the following types of expense?

Accepted Answer

A) Depreciation expense. 
B) Depletion expense. 
C) Amortization expense. 
D) Reclamation expense. 
A) Depreciation expense. 
B) Depletion expense. 
C) Amortization expense. 
D) Reclamation expense.

Question 11

An audit of Level 1 assets is likely to be less challenging than an audit of Level 3 assets.

Accepted Answer

A) True 
 B)False

Question 12

Which one of the following does not constitute a probable relationship between accounts?

Accepted Answer

A) Equipment and depreciation. 
B) Patent and amortization. 
C) Assets under capital leases and amortization. 
D) Oil reserves and depreciation. 
A) Equipment and depreciation. 
B) Patent and amortization. 
C) Assets under capital leases and amortization. 
D) Oil reserves and depreciation.

Question 13

Which of the following statements is true?

Accepted Answer

A) Intangible assets should be recorded at fair market value. 
B) Intangible assets should be recorded at cost. 
C) Intangible assets should be recorded at future market value. 
D) Intangible assets should not be recorded. 
A) Intangible assets should be recorded at fair market value. 
B) Intangible assets should be recorded at cost. 
C) Intangible assets should be recorded at future market value. 
D) Intangible assets should not be recorded.

Question 14

Audit procedures should be proportional to which of the following?

Accepted Answer

A) Size of the client. 
B) Size of the firm. 
C) The assessed risks. 
D) The assessed misstatements. 
A) Size of the client. 
B) Size of the firm. 
C) The assessed risks. 
D) The assessed misstatements.

Question 15

Which of the following long-lived assets presents the most difficulty in determining its cost?

Accepted Answer

A) Equipment. 
B) Inventory. 
C) Patent. 
D) All the above are equally difficult in determining cost. 
A) Equipment. 
B) Inventory. 
C) Patent. 
D) All the above are equally difficult in determining cost.

Question 16

Auditors must understand the business and economics of the client's business in order to perform meaningful planning analytical procedures for long-lived assets.

Accepted Answer

A) True 
 B)False

Question 17

The FASB has set a hierarchy of inputs to consider in assessing fair value.Which of the following valuations are generally viewed as the most subjective?

Accepted Answer

A) Level 0. 
B) Level 1. 
C) Level 2. 
D) Level 3. 
A) Level 0. 
B) Level 1. 
C) Level 2. 
D) Level 3.

Question 18

Which of the following is false regarding the valuation of goodwill?

Accepted Answer

A) U.S.accounting standards require that goodwill be specifically identified with an operating segment or a reporting unit. 
B) By definition,acquired parts of the business (or goodwill)must be sufficiently identifiable so that they can be managed as a unit or may be separately identified and sold as a unit. 
C) Goodwill is tested for impairment quarterly. 
D) Goodwill is the excess of the purchase price over the fair market value of the acquired company's tangible assets,identifiable intangible assets,and liabilities. 
A) U.S.accounting standards require that goodwill be specifically identified with an operating segment or a reporting unit. 
B) By definition,acquired parts of the business (or goodwill)must be sufficiently identifiable so that they can be managed as a unit or may be separately identified and sold as a unit. 
C) Goodwill is tested for impairment quarterly. 
D) Goodwill is the excess of the purchase price over the fair market value of the acquired company's tangible assets,identifiable intangible assets,and liabilities.

Question 19

Which one of the following is not an audit procedure used when testing restructuring charges?

Accepted Answer

A) Review current and proposed financial accounting standards to determine if changes have occurred in accounting for restructuring. 
B) Evaluate the qualifications of management. 
C) Mathematically test the estimates. 
D) Review and independently test the estimates by reviewing (a)contracts, (b)appraisals for property or estimates from investment bankers,and (c)severance contracts. 
A) Review current and proposed financial accounting standards to determine if changes have occurred in accounting for restructuring. 
B) Evaluate the qualifications of management. 
C) Mathematically test the estimates. 
D) Review and independently test the estimates by reviewing (a)contracts, (b)appraisals for property or estimates from investment bankers,and (c)severance contracts.

Question 20

Which of the following is not a significant challenge related to valuation issues for audits of merger and acquisition transactions?

Accepted Answer

A) Valuing the assets upon acquisition. 
B) Valuing the liabilities upon acquisition. 
C) Measuring restructuring charges. 
D) Measuring the qualifications of personnel from the acquired company. 
A) Valuing the assets upon acquisition. 
B) Valuing the liabilities upon acquisition. 
C) Measuring restructuring charges. 
D) Measuring the qualifications of personnel from the acquired company.

Which of the following is not a substantive audit procedure for leases?

In assessing the fair value of Level 1 assets,the auditor can perform an analysis of the volume of trading activity as part of obtaining audit evidence.

An inherent risk associated with intangible assets,such as a patent,is the accounting for research and development costs.

Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets?

Brown,Inc. ,obtained a patent for its product five years ago and should expense the entire amount of the unamortized balance if the product is no longer sold.

The tour of the manufacturing plant may best assist the auditor in determining which of the following?

If no control deficiencies are identified,how will the extent of substantive testing required differ from a setting where deficiencies in internal control were identified?

Goodwill is the excess of the purchase price over the fair market values of the acquired company's tangible assets,identifiable intangible assets,and liabilities.

The FASB standard on accounting for leases issued in 2016 requires most leases to be reported on the lessee's balance sheet,which is a significant change from the previous accounting requirements.

As natural resources are used up,the client has to recognize which of the following types of expense?

An audit of Level 1 assets is likely to be less challenging than an audit of Level 3 assets.

Which one of the following does not constitute a probable relationship between accounts?

Which of the following statements is true?

Audit procedures should be proportional to which of the following?

Which of the following long-lived assets presents the most difficulty in determining its cost?

Auditors must understand the business and economics of the client's business in order to perform meaningful planning analytical procedures for long-lived assets.

The FASB has set a hierarchy of inputs to consider in assessing fair value.Which of the following valuations are generally viewed as the most subjective?

Which of the following is false regarding the valuation of goodwill?

Which one of the following is not an audit procedure used when testing restructuring charges?

Which of the following is not a significant challenge related to valuation issues for audits of merger and acquisition transactions?

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters

Exam 12: Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

Which of the following is not a substantive audit procedure for leases?

In assessing the fair value of Level 1 assets,the auditor can perform an analysis of the volume of trading activity as part of obtaining audit evidence.

An inherent risk associated with intangible assets,such as a patent,is the accounting for research and development costs.

Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets?

Brown,Inc. ,obtained a patent for its product five years ago and should expense the entire amount of the unamortized balance if the product is no longer sold.

The tour of the manufacturing plant may best assist the auditor in determining which of the following?

If no control deficiencies are identified,how will the extent of substantive testing required differ from a setting where deficiencies in internal control were identified?

Goodwill is the excess of the purchase price over the fair market values of the acquired company's tangible assets,identifiable intangible assets,and liabilities.

The FASB standard on accounting for leases issued in 2016 requires most leases to be reported on the lessee's balance sheet,which is a significant change from the previous accounting requirements.

As natural resources are used up,the client has to recognize which of the following types of expense?

An audit of Level 1 assets is likely to be less challenging than an audit of Level 3 assets.

Which one of the following does not constitute a probable relationship between accounts?

Which of the following statements is true?

Audit procedures should be proportional to which of the following?

Which of the following long-lived assets presents the most difficulty in determining its cost?

Auditors must understand the business and economics of the client's business in order to perform meaningful planning analytical procedures for long-lived assets.

The FASB has set a hierarchy of inputs to consider in assessing fair value.Which of the following valuations are generally viewed as the most subjective?

Which of the following is false regarding the valuation of goodwill?

Which one of the following is not an audit procedure used when testing restructuring charges?

Which of the following is not a significant challenge related to valuation issues for audits of merger and acquisition transactions?

Quality Auditing: Why It Matters

The Auditors Responsibilities Regarding Fraud and Mechanisms to Address Fraud: Regulation and Corporate Governance

Internal Control Over Financial Reporting: Responsibilities of Management and the External Auditor

Professional Legal Liability

Professional Auditing Standards and the Audit Opinion Formulation Process

Audit Evidence

Planning the Audit: Identifying and Responding to the Risks of Material Misstatement

Specialized Audit Tools: Sampling and Generalized Audit Software

Auditing the Revenue Cycle

Auditing Cash and Marketable Securities

Auditing Inventory, Goods and Services, and Accounts Payable: the Acquisition and Payment Cycle

Auditing Long-Term Liabilities and Stockholders Equity Transactions

Completing a Quality Audit

Audit Reports

Filters