In testing plant and equipment balances, an auditor examines new additions listed on an analysis of plant and equipment. This procedure most likely obtains evidence concerning management's assertion of:

Question

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Choice "B" is correct. By examining the assets listed as new additions on an analysis of plant and equipment, an auditor obtains evidence concerning management's assertion of existence. Choice "A" is incorrect. Examining new additions that are already listed on the analysis does not provide evidence of completeness. The assertion of completeness relating to fixed assets might be tested by reviewing large repair and maintenance charges to determine if the cost should more properly have been capitalized (i.e., to evaluate whether fixed asset additions are complete). Choice "C" is incorrect. Understandability and classification deals with whether the components of the financial statements are properly presented, described, and disclosed. Examination of new assets does not provide evidence regarding this assertion. Choice "D" is incorrect. Valuation and allocation pertains to presentation of balances at their proper amounts. Examination of new assets does not provide evidence regarding this assertion.

In Testing Plant and Equipment Balances, an Auditor Examines New