Question 1

Which of the following is not one of the reasons auditors verify equipment differently from current asset accounts?

Accepted Answer

A) There are usually fewer current period acquisitions of equipment. 
B) The amount of any given acquisition is often material. 
C) The equipment is likely to be kept and maintained in the accounting records for several years. 
D) Current assets are subject to liens and encumbrances while equipment is not. 
A) There are usually fewer current period acquisitions of equipment. 
B) The amount of any given acquisition is often material. 
C) The equipment is likely to be kept and maintained in the accounting records for several years. 
D) Current assets are subject to liens and encumbrances while equipment is not.

Question 2

One of the auditor's primary objectives when auditing manufacturing equipment is completeness.

Accepted Answer

A) True 
 B)False

Question 3

Ordinarily,if you are auditing a continuing client,it is unnecessary to test the accuracy objective or the classification objective for fixed assets acquired in prior years.

Accepted Answer

A) True 
 B)False

Question 4

One of the primary objectives in examining the repairs and maintenance accounts is to obtain evidence that

Accepted Answer

A) expenditures of equipment have not been charged to expense. 
B) the actual amount recorded is the same as the budgeted amount. 
C) expenditures for equipment have been recorded in the proper period. 
D) revenue expenditures made on behalf of equipment have been recorded in the proper period. 
A) expenditures of equipment have not been charged to expense. 
B) the actual amount recorded is the same as the budgeted amount. 
C) expenditures for equipment have been recorded in the proper period. 
D) revenue expenditures made on behalf of equipment have been recorded in the proper period.

Question 5

Normally it may be unnecessary to examine supporting documentation for each addition to property,plant,and equipment,but it would be customary to verify

Accepted Answer

A) all large transactions. 
B) all unusual transactions. 
C) a representative sample of typical additions. 
D) all of the above. 
A) all large transactions. 
B) all unusual transactions. 
C) a representative sample of typical additions. 
D) all of the above.

Question 6

Describe the two tests auditors can perform to test for the existence and completeness of insurance policies in force.

Accepted Answer

The verification of existence and tests

Question 7

Recording an acquisition of a fixed asset at an improper amount affects the balance sheet until the company disposes of the asset,but the income statement is not affected.

Accepted Answer

A) True 
 B)False

Question 8

In the audit of accrued property taxes,the two most important balance-related audit objectives are completeness and accuracy.

Accepted Answer

A) True 
 B)False

Question 9

The source of debits in the equipment account is the

Accepted Answer

A) sales schedule. 
B) cash disbursements journal. 
C) cash receipts journal. 
D) acquisitions schedule. 
A) sales schedule. 
B) cash disbursements journal. 
C) cash receipts journal. 
D) acquisitions schedule.

Question 10

Which balance-related audit objective is not relevant to an audit of prepaid expenses?

Accepted Answer

A) rights 
B) accuracy 
C) detail tie-in 
D) realizable value 
A) rights 
B) accuracy 
C) detail tie-in 
D) realizable value

Question 11

In connection with a review of the prepaid insurance account,which of the following audit procedures would you be least likely to use?

Accepted Answer

A) Recompute the portion of the premium that expired during the year. 
B) Prepare excerpts of insurance policies for audit working papers. 
C) Confirm premium rates with an independent insurance broker. 
D) Examine support for premium payments. 
A) Recompute the portion of the premium that expired during the year. 
B) Prepare excerpts of insurance policies for audit working papers. 
C) Confirm premium rates with an independent insurance broker. 
D) Examine support for premium payments.

Question 12

The auditor needs to be aware that most users of financial statements rely most heavily on the ________ for making decisions.

Accepted Answer

A) balance sheet 
B) income statement 
C) statement of cash flows 
D) statement of stockholders' equity 
A) balance sheet 
B) income statement 
C) statement of cash flows 
D) statement of stockholders' equity

Question 13

The auditor needs to gain reasonable assurance that the equipment accounts in the fixed asset master file are not understated.Which of the following accounts would most likely be reviewed in making that determination?

Accepted Answer

A) depreciation expense 
B) repairs and maintenance expense 
C) gains/losses on sales and retirements 
D) cash 
A) depreciation expense 
B) repairs and maintenance expense 
C) gains/losses on sales and retirements 
D) cash

Question 14

You are the in-charge auditor for a company who has been an audit client for several years.Which of the following is not a category of tests commonly associated with the audit of manufacturing equipment?

Accepted Answer

A) verification of depreciation expense 
B) analytical procedures 
C) verification of current-period disposals 
D) verification of the beginning balance in the equipment account 
A) verification of depreciation expense 
B) analytical procedures 
C) verification of current-period disposals 
D) verification of the beginning balance in the equipment account

Question 15

When auditing disposals of property,plant,and equipment,the search for unrecorded disposals is essential.State the four audit procedures frequently used for verifying disposals.

Accepted Answer

•Review whether newly acquired assets re

Question 16

Because the failure to record disposals of property,plant,and equipment can significantly affect the financial statements,the search for unrecorded disposals is essential.Which of the following is not a procedure used to verify disposals?

Accepted Answer

A) Make inquiries of management and production personnel about the possibility of the disposal of assets. 
B) Review whether newly acquired assets replace existing assets. 
C) Test the valuation of fixed assets recorded in prior periods. 
D) Review plant modifications and changes in product line,property taxes,or insurance coverage. 
A) Make inquiries of management and production personnel about the possibility of the disposal of assets. 
B) Review whether newly acquired assets replace existing assets. 
C) Test the valuation of fixed assets recorded in prior periods. 
D) Review plant modifications and changes in product line,property taxes,or insurance coverage.

Question 17

Which of the following would generally not be a component of the audit of the acquisition and payment cycle?

Accepted Answer

A) adequacy of controls over acquisitions of long-lived assets 
B) tracing disposals of long-lived assets to the fixed asset master file 
C) determining the adequacy of the funds available for capital expenditures 
D) reperformance of recorded depreciation expense 
A) adequacy of controls over acquisitions of long-lived assets 
B) tracing disposals of long-lived assets to the fixed asset master file 
C) determining the adequacy of the funds available for capital expenditures 
D) reperformance of recorded depreciation expense

Question 18

When auditing accrued property taxes,

Accepted Answer

A) the auditors will generally only verify the larger payments since there are usually many property tax payments. 
B) property taxes should only be charged to one expense account. 
C) the auditor begins by obtaining a schedule of property tax payments from the client. 
D) the auditor must generally spend a considerable amount of time in this area. 
A) the auditors will generally only verify the larger payments since there are usually many property tax payments. 
B) property taxes should only be charged to one expense account. 
C) the auditor begins by obtaining a schedule of property tax payments from the client. 
D) the auditor must generally spend a considerable amount of time in this area.

Question 19

Confirmations are commonly used to verify additions of property,plant,and equipment.

Accepted Answer

A) True 
 B)False

Question 20

In testing acquisitions the auditor needs to understand the appropriate accounting guidance related to acquisition accounting.Which of the following is not an accounting consideration for the auditor as regards to acquisition cost?

Accepted Answer

A) inclusion of material transportation and installation costs 
B) recording of trade-in costs 
C) allocating costs when building and equipment are purchased at one price 
D) verifying that purchased equipment amounts correspond to the budgeted amount 
A) inclusion of material transportation and installation costs 
B) recording of trade-in costs 
C) allocating costs when building and equipment are purchased at one price 
D) verifying that purchased equipment amounts correspond to the budgeted amount

Exam 19: Completing the Tests in the Acquisition and Payment Cycle:

Which of the following is not one of the reasons auditors verify equipment differently from current asset accounts?

One of the auditor's primary objectives when auditing manufacturing equipment is completeness.

Ordinarily,if you are auditing a continuing client,it is unnecessary to test the accuracy objective or the classification objective for fixed assets acquired in prior years.

One of the primary objectives in examining the repairs and maintenance accounts is to obtain evidence that

Normally it may be unnecessary to examine supporting documentation for each addition to property,plant,and equipment,but it would be customary to verify

Describe the two tests auditors can perform to test for the existence and completeness of insurance policies in force.

Recording an acquisition of a fixed asset at an improper amount affects the balance sheet until the company disposes of the asset,but the income statement is not affected.

In the audit of accrued property taxes,the two most important balance-related audit objectives are completeness and accuracy.

The source of debits in the equipment account is the

Which balance-related audit objective is not relevant to an audit of prepaid expenses?

In connection with a review of the prepaid insurance account,which of the following audit procedures would you be least likely to use?

The auditor needs to be aware that most users of financial statements rely most heavily on the ________ for making decisions.

The auditor needs to gain reasonable assurance that the equipment accounts in the fixed asset master file are not understated.Which of the following accounts would most likely be reviewed in making that determination?

You are the in-charge auditor for a company who has been an audit client for several years.Which of the following is not a category of tests commonly associated with the audit of manufacturing equipment?

When auditing disposals of property,plant,and equipment,the search for unrecorded disposals is essential.State the four audit procedures frequently used for verifying disposals.

Because the failure to record disposals of property,plant,and equipment can significantly affect the financial statements,the search for unrecorded disposals is essential.Which of the following is not a procedure used to verify disposals?

Which of the following would generally not be a component of the audit of the acquisition and payment cycle?

When auditing accrued property taxes,

Confirmations are commonly used to verify additions of property,plant,and equipment.

In testing acquisitions the auditor needs to understand the appropriate accounting guidance related to acquisition accounting.Which of the following is not an accounting consideration for the auditor as regards to acquisition cost?

The Demand for Audit and Other Assurance Services

The Cpa Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details of Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls,

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

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Internal and Governmental Financial Auditing and Operational Auditing

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