Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 19, Problem 17.3MCQ
To determine
To identify the auditor’s principal objective in analyzing repairs and maintenance account
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1) The auditors analyze repairs and maintenance expense to:
a)determine that plant & equipment accounts are not understated.
b)determine that all maintenance items are recorded.
c)determine that plant & equipment accounts are not overstated
d)determine that maintenance expense amounts are authorized.
2)In auditing valuation of property, plant and equipment when its value is impaired, the auditors should:
a)recalculate the depreciation expense on the item.
b)recompute the net book value of the item.
c)vouch the purchase of the item.
d)evaluate the valuation model used for the item.
3)Which of the following best describes why auditors audit leased assets in conjunction with the audit of property, plant & equipment?
a)Management may choose to lease assets rather than buy them.
b)Leased assets have a higher risk of misstatement.
c)Most leased assets should be capitalized.d)Repairs and maintenance expense is affected by leased assets.
4)Which of the following best…
9. Assume that a client's controls over recording retirements of long-lived
tangible assets are not well designed. Which of the following procedures-
would the auditor plan to perform as a way of responding to the
heightened risk of material misstatement?
a. Select long-lived tangibie assets recorded in the property ledger and
locate them for inspection.
b. Inspect long-lived tangible assets located at the client location and
trace those assets to the property ledger.
c. Review the tangible long-lived asset, property ledger to see if
depreciation was recorded on cach tangible long-lived asset.
d. The auditor would perform all of the above procedures to respond to
the heightened risk of material misstatement.
Auditors should obtain evidence that there are no significant amounts of unrecorded retirements of property, plant and equipment.
a. Describe three ways that the auditors obtain evidence that there are no significant amounts of unrecorded retirements of equipment.
Chapter 19 Solutions
Auditing And Assurance Services
Ch. 19 - Identify three asset accounts, three expense...Ch. 19 - Explain the relationship between substantive tests...Ch. 19 - Prob. 3RQCh. 19 - Prob. 4RQCh. 19 - Prob. 5RQCh. 19 - Prob. 6RQCh. 19 - Prob. 7RQCh. 19 - Prob. 8RQCh. 19 - Prob. 9RQCh. 19 - Prob. 10RQ
Ch. 19 - Which documents will be used to verify accrued...Ch. 19 - Prob. 12RQCh. 19 - Prob. 13RQCh. 19 - Prob. 14RQCh. 19 - Prob. 15.1MCQCh. 19 - Prob. 15.2MCQCh. 19 - Prob. 15.3MCQCh. 19 - Prob. 16.1MCQCh. 19 - Prob. 16.2MCQCh. 19 - Prob. 16.3MCQCh. 19 - Prob. 17.1MCQCh. 19 - Prob. 17.2MCQCh. 19 - Prob. 17.3MCQCh. 19 - Prob. 18.1MCQCh. 19 - Prob. 18.2MCQCh. 19 - Prob. 18.3MCQCh. 19 - Prob. 19DQPCh. 19 - Prob. 20DQPCh. 19 - Prob. 21DQPCh. 19 - Prob. 22DQPCh. 19 - Prob. 24DQPCh. 19 - Prob. 25DQPCh. 19 - You are auditing the financial statements of...Ch. 19 - Prob. 27DQPCh. 19 - Prob. 28DQPCh. 19 - Prob. 29DQP
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- Required (kindly explain answers): 1. Why is it necessary to examine the lapsing schedule for additions and disposals of property, plant and equipment? 2. How do auditors test the reasonableness of the estimates used in relation to PPE (e.g. depreciation method, useful life, residual value?) 3. What are the procedures involved in determining the reasonableness of the depreciation expense during the year?arrow_forwardAuditors should obtain evidence that there are no significant amounts of unrecorded retirements of property, plant and equipment. a. Describe two ways that the auditors obtain evidence that there are no significant amounts of unrecorded retirements of property (land).arrow_forwardThe auditor assigned to audit the property, plant and equipment requested a schedule of property additions for the year as well as a schedule of repairs and maintenance expense, which of the following is incorrect? O The audit proposition that a capitalizable cost might have been erroneously charged as outright repairs and maintenance expense is necessary to audit the completeness assertion of PPE additions. O Tracing property additions to the physical asset is necessary to audit the existence assertion over PPE. O Items in the schedule of repairs and maintenance shall be vouched to the supporting documents to ascertain whether these are indeed to be recognized as outright expense. This is necessary to audit the occurrence assertion of the expense. Items in the schedule of property additions shall be traced back to the supporting documents to verify their propriety. This is necessary to audit the completeness assertion over PPE additions.arrow_forward
- Which of the following is not a typical internal control over long-lived assets? a. Periodically reassess the appropriateness of depletion categories. b. Identify obsolete or scrapped equipment and write it down to scrap value. c. Reconcile physical asset inventory with the property ledger. d. Periodically review management strategy and systematically assess the impairment of assets.arrow_forwardWhich of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets? a. Examine property tax records. b. Send confirmations to insurance agents. c. Examine scrap sales accounts. d. Make client inquiries.arrow_forwardIn performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions? a. Is depreciation calculation and recording automated? b. Is there periodic physical count and tagging of property, plant and equipment? Is the result of the count reconciled to ledgers and general ledgers? C. Both a and b. d. Neither a nor b. O a Od Oc Obarrow_forward
- In the examination of property, plant, and equipment, the auditor tries to determine all of the followingexcept theA. Effectiveness of the internal control structureB. Authorization of property abandoned during the yearC. Presence of an insurance policy related to property, plant, and equipmentD. Availability of company’s depreciation policyE. None of themarrow_forwardIn performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions? a. Is depreciation calculation and recording automated? b. Is there periodic physical count and tagging of property, plant and equipment? Is the result of the count reconciled to ledgers and general ledgers? c. Both a and b. d. Neither a nor b. Group of answer choices a c b darrow_forwardPlant, property and equipment and limited life identifiable intangible assets are recorded at cost and depreciated or amortized over their estimated useful lives. Auditors must satisfy themselves that such assets are accurately recorded at their original costs plus: a. their carrying amount is not impaired b. The estimated useful lives being used for depreciation and amortization are reasonable based on current and expected usage of the asset. c. depreciation and amortization are being calculated properly d. all of the above e. only B and Carrow_forward
- Explain the steps required to correct an error in accounting for property, plant, and equipment and intangible assets that is discovered in a year subsequent to the year the error was made.arrow_forward46 The auditor should test for unrecorded retirements of properties by _______________. This procedure is relevant for validating the __________ assertion over the properties. Group of answer choices Tracing physical assets observed while conducting an ocular inspection to the records; completeness. Vouching items in the property records to the acquisition source documents; existence. Recomputing the depreciation charges on the properties; valuation. Selecting items in the property records and then tracing them back to the physical assets while conducting an ocular inspection of the properties, existence.arrow_forwardThe least effective means for the auditor to determine whether a recorded intangible asset possesses the characteristic of an asset is a. Vouch the purchase by reference to underlying documentation. b. Inquire as to the status of the patent application. c. Evaluate the future revenue-producing capacity of the intangible asset. d. Analyze the research and development expenditures to determine that only those expenditures possessing future economic benefits have been capitalized.arrow_forward
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