The auditor is testing for unrecorded retirements/disposals of equipment. Which of the following audit procedures would the auditor most likely use?
A) Select items from the fixed asset master file and then physically locate them.
B) Examine the repairs and maintenance amount for large debits.
C) Compare current year's depreciation expense with the previous year's depreciation expense.
D) Trace acquisition documents to the fixed asset master file.

Question

Quizplus · Accepted Answer

The most effective way to test for unrecorded retirements/disposals of equipment is to physically locate those assets that are listed in the fixed asset master file. This is because physical verification will confirm whether the equipment is still in use or not, and will identify any assets that have been retired or disposed of without being recorded in the accounting records. The other options listed may provide some evidence of the existence or condition of fixed assets, but they do not specifically target the objective of testing for unrecorded retirements/disposals.

The Auditor Is Testing for Unrecorded Retirements/disposals of Equipment