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25 terms

Ch13

STUDY
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An auditor has identified numerous debits to accumulated depreciation of equipment.
Plant assets were retired during the year
Not on of the auditors' objectives in auditing depreciation
Establishing the reasonableness of the client's replacement policy
A continuing audit client's property, plant, and equipment and accounts receivable accounts have approximately the same year-end balanve
Expect the audit of accounts receivable to require more audit time
The most likely technique for the current year audit of goodwill which was acquired three years ago by a continuing audit client is
recomputation
The auditors may expect a proper debit to goodwill due to
A business combination
The following best describes the independent auditors' approach to obtaining satisfaction concerning depreciation expense in the income statement
Establich the basis for depreciable assets and verify the depreciation expense
In testing for unrecorded retirements of equipment, an auditor might
Slect items of equipment form the accounting records and then attempt to locate them during the plant tour
A plant manager would be mosst likely to provide information on
the existence of obsolete production equipment
Least likely to address control over the initiation and execution of equipment transactions are
procedures that exist to restrict access to equipment
When there are numerous property and equipment transactions during the year, an auditor who plans to assess control risk as a low level usually performs:
Tests of controls and limited tests of current year and property equipment transactions
The following best describes the auditor's approach to the audit of the ending balance of property, plant, and equipment for a continuing nonpublic client
Agreement of the beginning balance to prior year's working papers and audit of significant changes in the accounts
The following is not a control that should be established for purchases of equipment
Requiring that the department in need of the equipment order the equipment
The best evidence of continuous ownership of property
...
Best describes the auditors' typical observation of plant and equipment
The auditors observe major additions to plant and equipment made during the year
The following is used to obtain evidence that the client's equipment accounts are not understated
Analyzing repairs and maintenance expense accounts
The following is not a test primarily used to test property, plant and equipment accounts for overstatement
Vouching retirement of plant and equipment
The scope of audit procedures for the following account would be expected to decrease
Property, plant, and equipment
An auditor should expect the following to be most likely to indicate a departure from GAAP
Repairs have been capitalized to repair equipment that had broken down.
The following account is most likely that most of the audit work can be performed in advance of the balance sheet date
Property, plants, and equipment
The following is a customary audit procedure for the verification of the legal ownership of real property
Examination of deeds and title guaranty policies on hand
In violating company policy, Lowell Company erroneously capitalized the cost of painting its warehouse. The auditors examining Lowell's financial statements would most likely detect this when
Examining the construction work orders supporting items capitalized during the year
The auditor would most likely analyze the details to identify understatements of equipment acquisitions
Repairs and maintenance expense
The most important control procedure over acquisitions of property, plant, and equipment is
Using a budget forecast and control acquisitions and requirements
In examining PPE, the auditor tries not to determine
the adequacy of replacement funds
Property acquisitions that are misclassified as maintenance expense would most likely be detected by an internal control system that provides for
investigation of variances within a formal budgeting system