Question 1

If the auditor has detected misstatements in prior audits,the assessment of inherent risk for the property management process will usually be set higher.

Accepted Answer

A) True 
 B)False

Question 2

Identify the types of transactions that occur in the property management process.

Accepted Answer

The answer of Identify the types of transactions that occur...

Question 3

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.

Question 4

How do accounting standards regarding accounting for the impairment or disposal of long-lived assets affect the audit of property,plant,and equipment?

Accepted Answer

The answer of How do accounting standards regarding accounting for...

Question 5

In testing plant and equipment balances,an auditor may inspect new additions listed on the analysis of plant and equipment.This procedure is designed to obtain evidence concerning management's assertion(s)about

Accepted Answer

A)  Presentation and disclosure. 
B)  Existence or occurrence. 
C)  Both (1) presentation and disclosure and (2) existence and occurrence. 
D)  Neither (1) presentation and disclosure nor (2) existence and occurrence.

Question 6

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

Accepted Answer

A)  Routine maintenance on an important piece of machinery was charged to repairs and maintenance expense. 
B)  An addition to a building was charged to repairs and maintenance expense. 
C)  The company forgot to depreciate all of its equipment. 
D)  The company purchased an unusual amount of new equipment.

Question 7

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

Accepted Answer

A)  Noncapitalizable expenditures for repairs and maintenance have been recorded in the proper period. 
B)  Expenditures for property and equipment have been recorded in the proper period. 
C)  Noncapitalizable expenditures for repairs and maintenance have been properly charged to expense. 
D)  Expenditures for property and equipment have not been charged to expenses.

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  Adequacy of the provision for uncollectible accounts. 
B)  Appropriateness of physical inventory observation procedures. 
C)  Existence of obsolete machinery. 
D)  Deferral or procurement of certain necessary insurance coverage.

Question 11

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?

Accepted Answer

A)  An increase in property tax rates has not been recognized in the company's current year accrual. 
B)  The cashier began lapping accounts receivable in the current year. 
C)  Because of worsening economic conditions, the current year provision for uncollectible accounts was inadequate. 
D)  The company changed its capitalization policy for small tools in the current year.

Question 12

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

Accepted Answer

A)  Verifying the mathematical accuracy of the amounts charged to income as a result of depreciation expense. 
B)  Determining the method for computing depreciation expense and ascertaining that it is in accordance with generally accepted accounting principles. 
C)  Reconciling the amount of depreciation expense to those amounts credited to accumulated depreciation accounts. 
D)  Establishing the reasonableness of useful lives and depreciation methods for depreciable assets and recomputing the depreciation expense.

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