Question 1

The transportation and installation costs for a piece of equipment should be charged to an expense account.

Accepted Answer

The transportation and installation costs for a piece of equipment should be capitalized as part of the asset's cost, not expensed immediately.

Question 2

The auditor's tests for proper cutoff of current year acquisitions of property,plant,and equipment are usually done as part of accounts payable cutoff tests.

Accepted Answer

The auditor's tests for proper cutoff of current year acquisitions of property, plant, and equipment are usually done as part of accounts payable cutoff tests. This is because the accounts payable cutoff tests ensure that transactions are recorded in the proper period and that expenses associated with those transactions are properly recognized. The proper cutoff of acquisitions of property, plant, and equipment is important to ensure that these assets are properly recorded on the balance sheet and that any associated expenses are properly recognized in the proper period.

Question 3

Discuss the key internal controls related to the disposal of property,plant,and equipment.

Accepted Answer

The answer of Discuss the key internal controls related to...

Question 4

Completeness and existence are the auditor's primary objectives in auditing manufacturing equipment.

Accepted Answer

Completeness and existence are key assertions that auditors test for in auditing manufacturing equipment. Completeness ensures that all equipment is accounted for, while existence ensures that the equipment actually exists and is in use. These objectives help ensure the accuracy of the financial statements.

Question 5

Depreciation expense is normally verified as a part of tests of details of balances rather than as part of tests of controls or substantive tests of transactions.

Accepted Answer

Depreciation expense is an account balance that reflects the allocation of the cost of a long-term asset over its useful life. As such, it is usually verified as part of tests of details of balances, which are aimed at verifying the accuracy, completeness, and existence of the ending balance in an account. Depreciation expense is not typically subject to tests of controls or substantive tests of transactions, which are concerned with assessing the design and operating effectiveness of internal controls over the occurrence, accuracy, and completeness of transactions.

Question 6

The emphasis in auditing manufacturing equipment is on the verification of current-period disposals and acquisitions.

Accepted Answer

In auditing manufacturing equipment, the emphasis is indeed on verifying the accuracy and completeness of records related to current-period disposals and acquisitions to ensure that the financial statements accurately reflect the company's assets and any changes to them during the period.

Question 7

The primary accounting record for property,plant,and equipment accounts is the fixed asset master file.What is included for each fixed asset in the master file?

Accepted Answer

The answer of The primary accounting record for property,plant,and equipment...

Question 8

In auditing depreciation expense,one of the auditor's concerns is determining that the client's calculations are correct.In making this determination,the auditor must weigh four considerations.List these four considerations.

Accepted Answer

The answer of In auditing depreciation expense,one of the auditor's...

Question 9

Depreciation amounts are determined by exchange transactions with outside parties.

Accepted Answer

Depreciation amounts are determined by the decrease in value of an asset over time, based on factors such as wear and tear or obsolescence. They are not affected by exchange transactions with outside parties.

Question 10

The primary characteristic that distinguishes property,plant,and equipment from inventory,prepaid expenses,and investments is the intention to use property,plant,and equipment as a part of the operations of the client's business over their expected life.

Accepted Answer

Property, plant, and equipment are tangible assets that are used in the operations of a business and are expected to have a useful life of more than one year. On the other hand, inventory, prepaid expenses, and investments are not intended to be used in the operations of the business and are usually held for short-term purposes.

Question 11

The starting point for the verification of current-year acquisitions of property,plant,and equipment is normally a client-prepared schedule of all acquisitions recorded in the general ledger during the year.

Accepted Answer

This statement is true. The client-prepared schedule of property, plant, and equipment acquisitions is typically used by auditors to verify the accuracy and completeness of these transactions in the general ledger.

Question 12

The auditor receives the client's schedule of recorded disposals and then performs detail tie-in tests of the recorded disposals schedule.What procedures does the auditor perform on the client's schedule of recorded disposals?

Accepted Answer

The answer of The auditor receives the client's schedule of...

Question 13

One of the auditor's primary objectives when auditing manufacturing equipment is completeness.

Accepted Answer

One of the primary objectives of auditing manufacturing equipment is to ensure that all equipment is accounted for and accounted for accurately, meaning that completeness is a key concern for auditors in this area.

Question 14

Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account?
A) Extraordinary repairs have lengthened the life of an asset.
B) Prior years' depreciation charges were erroneously understated.
C) A reserve for possible loss on retirement has been recorded.
D) An asset has been recorded at its fair value.

Accepted Answer

Significant debits to an accumulated depreciation account might occur due to extraordinary repairs that have lengthened the life of an asset. This would result in an increase in the total accumulated depreciation of the asset.

Question 15

One of the reasons that auditors verify equipment differently from current assets is the amount of any given equipment acquisition is often material.

Accepted Answer

Auditors verify equipment differently from current assets because equipment acquisitions are often significant in amount, which increases the risk of material misstatement.

Question 16

Property,plant,and equipment is normally audited in a different manner than current asset accounts.State three reasons why this is so,and discuss the differences in how property,plant,and equipment is audited compared to current assets.

Accepted Answer

The answer of Property,plant,and equipment is normally audited in a...

Question 17

In testing acquisitions,the auditor must understand the relevant accounting standards to insure the client adheres to accepted accounting practices for property,plant,and equipment.Describe three of the auditor's concerns in this area.

Accepted Answer

The answer of In testing acquisitions,the auditor must understand the...

Question 18

State four of the seven specific balance-related audit objectives for property,plant,and equipment additions and,for each objective,describe one common test of details of balances.

Accepted Answer

The answer of State four of the seven specific balance-related...

Question 19

The most important audit objective for depreciation expense is detail tie-in.

Accepted Answer

The most important audit objective for depreciation expense is accuracy, as it ensures the depreciation calculations are correct and in accordance with the relevant accounting standards. Detail tie-in is more concerned with verifying that details in the accounting records match the details in the supporting documentation.

Question 20

When auditing disposals of property,plant,and equipment,the search for unrecorded disposals is essential.State the four audit procedures frequently used for verifying disposals.

Accepted Answer

The answer of When auditing disposals of property,plant,and equipment,the search...

Quiz 19: Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts