Which of the following situations has the best chance of being detected when a CPA computes the ratio of repairs and maintenance expense to the related property, plant, and equipment accounts, compares to prior years' ratios, and investigates all changes exceeding a fixed percentage?

Question

Quizplus · Accepted Answer

Computing the ratio of repairs and maintenance expense to property, plant, and equipment accounts and comparing to prior years' ratios helps to detect if the company is failing to capitalize major repairs that increase the useful life of equipment. This is because major repairs should be capitalized and amortized over the remaining useful life of the asset rather than expensed immediately. This would lead to an increase in the ratio of repairs and maintenance expense to property, plant, and equipment accounts.

Which of the Following Situations Has the Best Chance of Being