Question 1

A typical procedure in the audit of property is examination of public records to verify the ownership of the property.

Accepted Answer

A) True 
 B)False  False

Question 2

The auditors typically observe all major items of property, plant, and equipment every year.

Accepted Answer

A) True 
 B)False  False

Question 3

A continuing audit client's property, plant, and equipment and accounts receivable accounts have approximately the same year-end balance. In this circumstance, when compared to property, plant and equipment, one would normally expect the audit of accounts receivable to require:

Accepted Answer

A)  More audit time. 
B)  Less audit time. 
C)  Approximately the same amount of audit time. 
D)  Similar confirmation procedures. 
A)  More audit time. 
B)  Less audit time. 
C)  Approximately the same amount of audit time. 
D)  Similar confirmation procedures. A

Question 4

Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

Accepted Answer

A)  Examination of correspondence with the corporate counsel concerning acquisition matters. 
B)  Examination of ownership documents registered and on file at a public hall of records. 
C)  Examination of corporate minutes and resolutions concerning the approval to acquire property, plant, and equipment. 
D)  Examination of deeds and title guaranty policies on hand. 
A)  Examination of correspondence with the corporate counsel concerning acquisition matters. 
B)  Examination of ownership documents registered and on file at a public hall of records. 
C)  Examination of corporate minutes and resolutions concerning the approval to acquire property, plant, and equipment. 
D)  Examination of deeds and title guaranty policies on hand.

Question 5

The primary purpose of internal control over plant and equipment is to safeguard the assets from theft.

Accepted Answer

A) True 
 B)False

Question 6

During the audit of Zing Company, Bill Jones, a staff member on the audit, identified a number of items that have been included as additions to property, plant, and equipment. Jones has indicated to you that he believes the following items should not be capitalized. Indicate with an "X" whether you believe the item should be capitalized or expensed.

Accepted Answer

The answer of During the audit of Zing Company, Bill...

Question 7

Even when internal control is weak, a significant portion of the audit work on property, plant, and equipment may be performed at an interim date.

Accepted Answer

A) True 
 B)False

Question 8

An auditor has identified numerous debits to accumulated depreciation of equipment. Which of the following is most likely?

Accepted Answer

A)  The estimated remaining useful lives of equipment were increased. 
B)  Plant assets were retired during the year. 
C)  The prior year's depreciation expense was erroneously understated. 
D)  Overhead allocations were revised at year-end. 
A)  The estimated remaining useful lives of equipment were increased. 
B)  Plant assets were retired during the year. 
C)  The prior year's depreciation expense was erroneously understated. 
D)  Overhead allocations were revised at year-end.

Question 9

Idle equipment will generally need to be reclassified as a current asset.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following best describes the independent auditors' approach to obtaining satisfaction concerning depreciation expense in the income statement?

Accepted Answer

A)  Verify the mathematical accuracy of the amounts charged to income as a result of depreciation expense. 
B)  Determine the method for computing depreciation expense and ascertain that is in accordance with generally accepted accounting principles. 
C)  Reconcile the amount of depreciation expense to those amounts credited to accumulated depreciation accounts. 
D)  Establish the basis for depreciable assets and verify the depreciation expense. 
A)  Verify the mathematical accuracy of the amounts charged to income as a result of depreciation expense. 
B)  Determine the method for computing depreciation expense and ascertain that is in accordance with generally accepted accounting principles. 
C)  Reconcile the amount of depreciation expense to those amounts credited to accumulated depreciation accounts. 
D)  Establish the basis for depreciable assets and verify the depreciation expense.

Question 11

Which of the following is not a test primarily used to test property, plant and equipment accounts for overstatement?

Accepted Answer

A)  Investigation of reductions in insurance coverage. 
B)  Review of property tax bills. 
C)  Examination of retirement work orders prepared during the year. 
D)  Vouching retirements of plant and equipment. 
A)  Investigation of reductions in insurance coverage. 
B)  Review of property tax bills. 
C)  Examination of retirement work orders prepared during the year. 
D)  Vouching retirements of plant and equipment.

Question 12

Which of the following is not one of the auditors' objectives in auditing depreciation?

Accepted Answer

A)  Establishing the reasonableness of the client's replacement policy. 
B)  Establishing that the methods used are appropriate. 
C)  Establishing that the methods are consistently applied. 
D)  Establishing the reasonableness of depreciation computations. 
A)  Establishing the reasonableness of the client's replacement policy. 
B)  Establishing that the methods used are appropriate. 
C)  Establishing that the methods are consistently applied. 
D)  Establishing the reasonableness of depreciation computations.

Question 13

Material purchases of assets from an affiliated company should be disclosed in the financial statements.

Accepted Answer

A) True 
 B)False

Question 14

A major control procedure related to plant and equipment is a budget for depreciation.

Accepted Answer

A) True 
 B)False

Question 15

For which of the following ledger accounts would the auditor be most likely to analyze the details to identify understatements of equipment acquisitions?

Accepted Answer

A)  Service Revenue. 
B)  Sales. 
C)  Repairs and maintenance expense. 
D)  Sales salaries expense. 
A)  Service Revenue. 
B)  Sales. 
C)  Repairs and maintenance expense. 
D)  Sales salaries expense.

Question 16

Which of the following is used to obtain evidence that the client's equipment accounts are not understated?

Accepted Answer

A)  Analyzing repairs and maintenance expense accounts. 
B)  Vouching purchases of plant and equipment. 
C)  Recomputing depreciation expense. 
D)  Analyzing the miscellaneous revenue account. 
A)  Analyzing repairs and maintenance expense accounts. 
B)  Vouching purchases of plant and equipment. 
C)  Recomputing depreciation expense. 
D)  Analyzing the miscellaneous revenue account.

Question 17

In the audit of depletion the auditors must often rely on the work of specialists.

Accepted Answer

A) True 
 B)False

Question 18

When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs:

Accepted Answer

A)  Tests of controls and extensive tests of property and equipment balances at the end of the year. 
B)  Analytical procedures for current year property and equipment transactions. 
C)  Tests of controls and limited tests of current year property and equipment transactions. 
D)  Analytical procedures for property and equipment balances at the end of the year. 
A)  Tests of controls and extensive tests of property and equipment balances at the end of the year. 
B)  Analytical procedures for current year property and equipment transactions. 
C)  Tests of controls and limited tests of current year property and equipment transactions. 
D)  Analytical procedures for property and equipment balances at the end of the year.

Question 19

Plant and equipment are not as inherently risky as are other assets, such as inventories and accounts receivable. However, a company should still endeavor to maintain effective internal control over plant and equipment.
a. Describe the principal purpose of internal controls relating to plant and equipment.
b. List and describe four major controls applicable to plant and equipment.

Accepted Answer

a. The principal purpose of internal con

Question 20

Which of the following best describes the auditors' typical observation of plant and equipment?

Accepted Answer

A)  The auditors observe a physical inventory of plant and equipment, annually. 
B)  The auditors observe all additions to plant and equipment made during the year. 
C)  The auditors observe all major plant and equipment items in the clients' accounts each year. 
D)  The auditors observe major additions to plant and equipment made during the year. 
A)  The auditors observe a physical inventory of plant and equipment, annually. 
B)  The auditors observe all additions to plant and equipment made during the year. 
C)  The auditors observe all major plant and equipment items in the clients' accounts each year. 
D)  The auditors observe major additions to plant and equipment made during the year.

A typical procedure in the audit of property is examination of public records to verify the ownership of the property.

The auditors typically observe all major items of property, plant, and equipment every year.

A continuing audit client's property, plant, and equipment and accounts receivable accounts have approximately the same year-end balance. In this circumstance, when compared to property, plant and equipment, one would normally expect the audit of accounts receivable to require:

Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

The primary purpose of internal control over plant and equipment is to safeguard the assets from theft.

Even when internal control is weak, a significant portion of the audit work on property, plant, and equipment may be performed at an interim date.

An auditor has identified numerous debits to accumulated depreciation of equipment. Which of the following is most likely?

Idle equipment will generally need to be reclassified as a current asset.

Which of the following best describes the independent auditors' approach to obtaining satisfaction concerning depreciation expense in the income statement?

Which of the following is not a test primarily used to test property, plant and equipment accounts for overstatement?

Which of the following is not one of the auditors' objectives in auditing depreciation?

Material purchases of assets from an affiliated company should be disclosed in the financial statements.

A major control procedure related to plant and equipment is a budget for depreciation.

For which of the following ledger accounts would the auditor be most likely to analyze the details to identify understatements of equipment acquisitions?

Which of the following is used to obtain evidence that the client's equipment accounts are not understated?

In the audit of depletion the auditors must often rely on the work of specialists.

When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs:

Which of the following best describes the auditors' typical observation of plant and equipment?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

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Exam 13: Property, Plant, and Equipment: Depreciation and Depletion

A typical procedure in the audit of property is examination of public records to verify the ownership of the property.

The auditors typically observe all major items of property, plant, and equipment every year.

A continuing audit client's property, plant, and equipment and accounts receivable accounts have approximately the same year-end balance. In this circumstance, when compared to property, plant and equipment, one would normally expect the audit of accounts receivable to require:

Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

The primary purpose of internal control over plant and equipment is to safeguard the assets from theft.

Even when internal control is weak, a significant portion of the audit work on property, plant, and equipment may be performed at an interim date.

An auditor has identified numerous debits to accumulated depreciation of equipment. Which of the following is most likely?

Idle equipment will generally need to be reclassified as a current asset.

Which of the following best describes the independent auditors' approach to obtaining satisfaction concerning depreciation expense in the income statement?

Which of the following is not a test primarily used to test property, plant and equipment accounts for overstatement?

Which of the following is not one of the auditors' objectives in auditing depreciation?

Material purchases of assets from an affiliated company should be disclosed in the financial statements.

A major control procedure related to plant and equipment is a budget for depreciation.

For which of the following ledger accounts would the auditor be most likely to analyze the details to identify understatements of equipment acquisitions?

Which of the following is used to obtain evidence that the client's equipment accounts are not understated?

In the audit of depletion the auditors must often rely on the work of specialists.

When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk at a low level usually performs:

Which of the following best describes the auditors' typical observation of plant and equipment?

The Role of the Public Accountant in the American Economy

Professional Standards

Professional Ethics

Legal Liability of Cpas

Audit Evidence and Documentation

Planning the Audit; Linking Audit Procedures to Risk

Internal Control

Consideration of Internal Control in an Information Technology Environment

Audit Sampling

Cash and Financial Investments

Accounts Receivable, Notes Receivable, and Revenue

Inventories and Cost of Goods Sold

Accounts Payable and Other Liabilities

Debt and Equity Capital

Auditing Operations and Completing the Audit

Auditors Report

Integrated Audits of Public Companies

Additional Assurance Services: Historical Financial Information

Additional Assurance Services: Other Information

Internal, Operational, and Compliance Auditing

Filters