Question 1

The cutoff assertion for prepaid insurance

Accepted Answer

A)  Is never tested because amounts always are immaterial. 
B)  Is best tested as part of the testing of property and equipment purchasing. 
C)  Is best tested exclusively by sending confirmations to vendors. 
D)  Is best tested by recomputing the unexpired portion of insurance policies in effect.

Question 2

If a periodic physical inventory of property, plant, and equipment is taken, the individual responsible for the inventory should be independent of the custodial and record-keeping functions.

Accepted Answer

A) True 
 B)False

Question 3

Determining that proper amounts of depreciation are expensed provides assurance about management's assertions of presentation and disclosure and

Accepted Answer

A)  Valuation and allocation. 
B)  Completeness. 
C)  Rights and obligations. 
D)  Existence.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A normal audit procedure is to analyze the current year's repairs and maintenance accounts to provide evidence in support of the audit proposition that

Accepted Answer

A)  Expenditures for fixed assets have been recorded in the proper period. 
B)  Capital expenditures have been properly authorized. 
C)  Noncapitalizable expenditures have been properly expensed. 
D)  Expenditures for fixed assets have been capitalized.

Question 6

Testing a sample of repairs and maintenance 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 property, plant, and equipment account?

Accepted Answer

A)  Occurrence. 
B)  Completeness. 
C)  Cutoff. 
D)  Authorization.

Question 7

Match each of the following intangible assets with its proper general category.

Accepted Answer

The answer of Match each of the following intangible assets...

Question 8

Substantive analytical procedures should not be used in the audit of property, plant, and equipment.

Accepted Answer

A) True 
 B)False

Question 9

The purchase of capital assets should be consistent with the authorization table used by the entity to approve such transactions. However, no such table is normally used for lease transactions.

Accepted Answer

A) True 
 B)False

Question 10

An auditor typically sets inherent risk for intangible assets at this level

Accepted Answer

A)  Low. 
B)  Moderate. 
C)  Zero. 
D)  High.

Question 11

The auditor may conclude that depreciation charges are insufficient by noting

Accepted Answer

A)  Insured values greatly in excess of book values. 
B)  Large amounts of fully depreciated assets. 
C)  Continuous trade-ins of relatively new assets. 
D)  Excessive recurring losses on assets retired.

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

The cutoff assertion for prepaid insurance

If a periodic physical inventory of property, plant, and equipment is taken, the individual responsible for the inventory should be independent of the custodial and record-keeping functions.

Determining that proper amounts of depreciation are expensed provides assurance about management's assertions of presentation and disclosure and

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

A normal audit procedure is to analyze the current year's repairs and maintenance accounts to provide evidence in support of the audit proposition that

Testing a sample of repairs and maintenance 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 property, plant, and equipment account?

Match each of the following intangible assets with its proper general category.

Substantive analytical procedures should not be used in the audit of property, plant, and equipment.

The purchase of capital assets should be consistent with the authorization table used by the entity to approve such transactions. However, no such table is normally used for lease transactions.

An auditor typically sets inherent risk for intangible assets at this level

The auditor may conclude that depreciation charges are insufficient by noting