Exam 19: Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

________ expense is rarely analyzed unless analytical procedures indicate high potential for material misstatement.

Property, plant, and equipment are assets that have expected lives of less than one year, are used in the business, and are not acquired for resale.

Describe the audit procedures used to verify the accuracy and detail tie-in objectives for prepaid insurance.

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.

The realizable value audit objective is not applicable when auditing prepaid insurance or insurance expense.

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.

Equipment additions which are infrequent in occurrence and large in dollar amounts, which were included as part of the tests of the acquisition and payment cycle, allow the auditor to rely heavily on the results of such tests.

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

Which type of audit procedure would normally be sufficient for purposes of auditing prepaid expenses and deferred charges?

One very useful method of auditing depreciation is to use an analytical procedure to test for reasonableness.

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?

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

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

If management hires a specialist to estimate the fair value of a long-lived asset, the auditor should take appropriate steps as required by auditing standards in evaluating the work of the specialist

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.

Auditors verify the accruals before they verify the current year property tax payments.

What are several substantive analytical procedures used in the audit of prepaid insurance and insurance expense?

Depreciation expense results from the allocation of accounting data rather than discrete transactions.

In determining the reasonableness of the client's amount for depreciation expense the auditor is primarily concerned that the client has followed a consistent policy and the calculations are correct. Which of the following audit objectives best addresses the above concerns?