Which of the following internal controls most likely would justify a reduced assessed level of control risk concerning plant and equipment acquisitions?

Question

Quizplus · Accepted Answer

Choice "A" is correct. Periodic physical inspection of plant and equipment by the internal audit staff is an internal control that would most likely justify a reduced assessed level of control risk concerning plant and equipment acquisitions. Such inspections would provide assurance that recorded acquisitions are real (existence assertion). Choice "B" is incorrect. The comparison of current-year plant and equipment account balances with prioryear actual balances might indicate that acquisitions occurred, but it would not justify a reduced assessed level of control risk, since the controls over the acquisition process are not tested. Choice "C" is incorrect. A review of prenumbered purchase orders is unlikely to provide evidence regarding plant and equipment acquisitions. (Generally a special requisition form is used for such acquisitions.) Choice "D" is incorrect. Approval of depreciation entries has little bearing on the control risk relating to plant and equipment acquisitions.

Which of the Following Internal Controls Most Likely Would Justify