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

Cutoff for acquisitions of insurance is normally not a significant problem for the auditors.

Auditors needs to examine purchase and/or lease contracts entered into related to property, plant, and equipment, to determine if capitalization of the property, plant, and equipment is appropriate or not.

Depreciation amounts are determined by exchange transactions with outside parties.

Depreciation expense is normally verified as a part of tests of details of balances rather than as part of tests of controls or substantive tests of transactions.

The most important audit objective for depreciation expense is detail tie-in.

The approach to auditing patents and copyrights is similar to that used for property, plant, and equipment accounts.

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

The most common audit test to verify equipment additions is to

When the auditor is determining whether the client followed a consistent depreciation policy from period to period, and the client's depreciation calculations are correct, the balance-related audit objective of ________ is being determined for depreciation expense.

The types of assets, expenses, and liabilities associated with the acquisition and payment cycle will differ by company.

The source of debits in the equipment account is the

Improperly classifying a fixed asset by recording the amount in the repairs and maintenance expense account will have an effect on which of the following financial statements until the asset would normally have been depreciated?

When auditing accrued property taxes,

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

In the audit of equipment and related accounts, verifying that the ending balances are properly classified and are adequately disclosed in the financial statements is one of the tests the auditor must perform.

When an auditor recomputes the unexpired portion of prepaid insurance, they are satisfying which audit objective?

In the analysis of expense accounts, the auditor verifies transactions in specific accounts to determine whether the transactions are properly classified and accurately recorded.

You are auditing the acquisition and payment cycle and note the presence of excessive recurring losses on retired assets. You may conclude that

A set of records for each piece of equipment that includes descriptive information, date of acquisition, original cost, current year depreciation, and accumulated depreciation is the

The auditor should keep in mind that the amount in insurance expense is a residual amount.