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

Performance materiality is important for verifying current year additions because these transactions have consistent dollar amounts from year to year.

The auditor receives the client's schedule of recorded disposals and then performs detail tie-in tests of the recorded disposals schedule. What procedures does the auditor perform on the client's schedule of recorded disposals?

When auditing insurance expense, auditors normally rely on analytical procedures and limited testing of the debits to ensure that they arose from credits to prepaid insurance.

Explain the audit objective allocation and why it is important to have accurate allocation within the financial statements, particularly for property, plant, and equipment.

Which of the following audit tests both have the effect of simultaneously verifying balance sheet and income statement accounts?

The primary accounting record for property, plant, and equipment accounts is the fixed asset master file. What is included for each fixed asset in the master file?

A long-lived asset that is classified as held for sale is measured at the lower of the carrying value or fair value less the cost to sell, and should be presented, separately, in the financial statements if material.

Controls over the acquisition and recording of insurance are a part of which of the following transaction cycles?

State four of the seven specific balance-related audit objectives for property, plant, and equipment additions and, for each objective, describe one common test of details of balances.

Which of the following statements about the audit of fixed assets is the least correct?

For auditors, there is a significant amount of objectivity management must follow under generally accepted accounting principles in preparing the analysis required for goodwill impairment testing.

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

Insurance expense for the period is a function of which of the following?

Which of the following tests are typically not necessary when auditing a client's schedule of recorded disposals?

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.

Auditors verify and emphasize current additions of equipment. Which of the following is not a reason for this verification and emphasis?

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?

The test of details of balances procedure to "examine vendors' invoices of closely related accounts such as repairs to uncover items that should be property, plant, and equipment" satisfies the audit objective of

You are auditing Manufacturing Company and testing the audit related objective of completeness for the equipment accounts. Which of the following audit procedures is most likely to achieve your objective?

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