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 assertions of:

Question

Quizplus · Accepted Answer

Choice "B" is correct. Inspection of plant and equipment by the auditor provides evidence concerning the existence of the equipment; if the auditor can see it, it exists. However, physical inspection does not provide any evidence concerning whether the amounts paid for plant and equipment are properly presented, described, and disclosed. Only reviewing drafts of the financial statements will provide evidence regarding understandability and classification. Choice "A" is incorrect. Physical inspection does not provide any evidence concerning whether the amounts paid for plant and equipment are properly presented, described, and disclosed. Choice "C" is incorrect. Physical inspection of equipment does not provide any evidence concerning whether the amounts paid for the equipment are properly presented, described, and disclosed. Only reviewing drafts of the financial statements provides evidence regarding understandability and classification. However, inspection of plant and equipment by the auditor does provide evidence concerning the existence of the equipment; if the auditor can see it, it exists. Choice "D" is incorrect. Inspection of plant and equipment by the auditor does provide evidence concerning the existence of the equipment: if the auditor can see it, it exists.

In Testing Plant and Equipment Balances, an Auditor May Inspect