Question 1

The company's choices for determining the fixed asset's useful life and residual value impact the amount of depreciation recorded.

Accepted Answer

A) True 
 B)False

Question 2

Discuss the key internal controls for prepaid insurance that affect the auditor's extent of testing of the prepaid insurance account.

Accepted Answer

Internal controls for prepaid insurance

Question 3

Which of the following audit procedures would be the most correct in determining the audit objective of existence for the equipment account in the fixed asset master file?

Accepted Answer

A) Examine vendor invoices and receiving reports. 
B) Review transactions near the balance sheet date. 
C) Recalculate vendor invoices. 
D) Examine vendor invoices for correct accounting treatment. 
A) Examine vendor invoices and receiving reports. 
B) Review transactions near the balance sheet date. 
C) Recalculate vendor invoices. 
D) Examine vendor invoices for correct accounting treatment.

Question 4

The most effective and efficient audit approach in the examination of the income statement would be which of the following?

Accepted Answer

A) Examine income statement accounts concurrently with the related balance sheet accounts. 
B) Compare company's components of net income to other businesses in the same industry. 
C) Compare company's components of net income to the previous two years. 
D) Examine changes in all balance sheet accounts. 
A) Examine income statement accounts concurrently with the related balance sheet accounts. 
B) Compare company's components of net income to other businesses in the same industry. 
C) Compare company's components of net income to the previous two years. 
D) Examine changes in all balance sheet accounts.

Question 5

The audit procedure "foot the schedule of fixed assets acquisitions and trace the total to the general ledger" relates most closely to the completeness objective for fixed assets acquisitions.

Accepted Answer

A) True 
 B)False

Question 6

One of the reasons that auditors verify equipment differently from current assets is the amount of any given equipment acquisition is often material.

Accepted Answer

A) True 
 B)False

Question 7

The audit procedure that requires an auditor to "foot the acquisition schedule" relates to which balance-related audit objective?

Accepted Answer

A) classification 
B) detail tie-in 
C) existence 
D) cut-off 
A) classification 
B) detail tie-in 
C) existence 
D) cut-off

Question 8

The auditor must know the client's capitalization policies to determine whether acquisitions are

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 9

The starting point for the verification of current-year acquisitions of property,plant,and equipment is normally a client-prepared schedule of all acquisitions recorded in the general ledger during the year.

Accepted Answer

A) True 
 B)False

Question 10

Problems commonly encountered in the audit of prepaid insurance are not typical of the problems found in other prepaid assets.

Accepted Answer

A) True 
 B)False

Question 11

Property,plant,and equipment is normally audited in a different manner than current asset accounts.State three reasons why this is so,and discuss the differences in how property,plant,and equipment is audited compared to current assets.

Accepted Answer

•There are usually fewer current period

Question 12

Discuss the key internal controls related to the disposal of property,plant,and equipment.

Accepted Answer

The most important internal control over

Question 13

The primary characteristic that distinguishes property,plant,and equipment from inventory,prepaid expenses,and investments is the intention to use property,plant,and equipment as a part of the operations of the client's business over their expected life.

Accepted Answer

A) True 
 B)False

Question 14

Other accrued expenses are normally considered to be associated with the acquisition and payment cycle.

Accepted Answer

A) True 
 B)False

Question 15

Tests of controls provide an indication of the likelihood of misstatements in both the income statement and the balance sheet,simultaneously.

Accepted Answer

A) True 
 B)False

Question 16

Depreciation amounts are determined by exchange transactions with outside parties.

Accepted Answer

A) True 
 B)False

Question 17

The auditor's starting point for verifying disposals of property,plant,and equipment is the

Accepted Answer

A) equipment account in the general ledger. 
B) file of shipping documents. 
C) client's schedule of recorded disposals. 
D) equipment subsidiary ledger. 
A) equipment account in the general ledger. 
B) file of shipping documents. 
C) client's schedule of recorded disposals. 
D) equipment subsidiary ledger.

Question 18

Which is not one of the tests that would be used in the audit of equipment,depreciation expense,and accumulated depreciation?

Accepted Answer

A) Verify the ending balance in the asset account. 
B) Send confirmations to the sales personnel who sold the equipment to the company. 
C) Perform substantive analytical procedures. 
D) Verify current year acquisitions. 
A) Verify the ending balance in the asset account. 
B) Send confirmations to the sales personnel who sold the equipment to the company. 
C) Perform substantive analytical procedures. 
D) Verify current year acquisitions.

Question 19

Which of the following expenses is not typically evaluated as part of the audit of the acquisition and payment cycle?

Accepted Answer

A) depreciation expense 
B) insurance expense 
C) estimated liability for warranties 
D) property tax expense 
A) depreciation expense 
B) insurance expense 
C) estimated liability for warranties 
D) property tax expense

Question 20

When performing the test of details of balances,the balance-related audit objective of classifications is closely related to the objective of

Accepted Answer

A) accuracy. 
B) detail tie-in. 
C) existence. 
D) completeness. 
A) accuracy. 
B) detail tie-in. 
C) existence. 
D) completeness.

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

The company's choices for determining the fixed asset's useful life and residual value impact the amount of depreciation recorded.

Discuss the key internal controls for prepaid insurance that affect the auditor's extent of testing of the prepaid insurance account.

Which of the following audit procedures would be the most correct in determining the audit objective of existence for the equipment account in the fixed asset master file?

The most effective and efficient audit approach in the examination of the income statement would be which of the following?

The audit procedure "foot the schedule of fixed assets acquisitions and trace the total to the general ledger" relates most closely to the completeness objective for fixed assets acquisitions.

One of the reasons that auditors verify equipment differently from current assets is the amount of any given equipment acquisition is often material.

The audit procedure that requires an auditor to "foot the acquisition schedule" relates to which balance-related audit objective?

The auditor must know the client's capitalization policies to determine whether acquisitions are

The starting point for the verification of current-year acquisitions of property,plant,and equipment is normally a client-prepared schedule of all acquisitions recorded in the general ledger during the year.

Problems commonly encountered in the audit of prepaid insurance are not typical of the problems found in other prepaid assets.

Property,plant,and equipment is normally audited in a different manner than current asset accounts.State three reasons why this is so,and discuss the differences in how property,plant,and equipment is audited compared to current assets.

Discuss the key internal controls related to the disposal of property,plant,and equipment.

The primary characteristic that distinguishes property,plant,and equipment from inventory,prepaid expenses,and investments is the intention to use property,plant,and equipment as a part of the operations of the client's business over their expected life.

Other accrued expenses are normally considered to be associated with the acquisition and payment cycle.

Tests of controls provide an indication of the likelihood of misstatements in both the income statement and the balance sheet,simultaneously.

Depreciation amounts are determined by exchange transactions with outside parties.

The auditor's starting point for verifying disposals of property,plant,and equipment is the

Which is not one of the tests that would be used in the audit of equipment,depreciation expense,and accumulated depreciation?

Which of the following expenses is not typically evaluated as part of the audit of the acquisition and payment cycle?

When performing the test of details of balances,the balance-related audit objective of classifications is closely related to the objective of

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

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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