Exam 12: Auditing Long-Lived Assets: Acquisition, Use, Impairment, and Disposal

If the auditor is performing substantive procedure to determine whether the long-lived asset balance is reflected on the balance sheet in the noncurrent section,which of the following assertions is being tested?

Audits of Level 3 assets are the most straightforward as they involve an observable,active market.

Under accounting guidance issued by the FASB in 2017,a goodwill impairment loss will be recognized when the fair value of the reporting unit is less than its carrying value even if the difference is attributable to the fair value of other assets in the reporting unit being less than their respective carrying values.

Which of the following procedures is a substantive procedure that relates to the rights and obligations assertion?

Knowledge of industry product trends is crucial to the auditor's identification of the potential for the impairment of assets.

If planning analytical procedures identify some unexpected relationships,the auditor would conclude that there may be a heightened risk of material misstatements.

Which one of the following factors is not an inherent risk associated with long-lived assets?

The auditor typically makes a physical inspection of most of the material fixed asset acquisitions.

For intangible assets,controls should be designed to do which of the following?

An auditor's review of the repair expense to identify any capital expenditures is a test related to which management assertion?

Long-lived assets typically represent the smallest single category of assets in many organizations.

Which of the following controls is not a typical control that affects multiple assertions for long-lived assets?

Estimating the amount of reclamation costs is an inherent risk associated with natural resources.

Fraud Risks List potential fraud schemes related to long-lived assets.

Which of the following is a term used to describe management's recognition that a significant portion of long-lived assets is no longer as productive as originally expected?

An auditor should compare the unaudited financial statements with both past results and industry trends to gain an indication about the possibility of fraud.

Relevant assertions for long-lived assets List the five management assertions relevant for long-lived assets and explain how each one is relevant.

If restructuring charges are not calculated correctly,the charges can be used to fraudulently manipulate income.

Gains on the sale of equipment usually indicate that the depreciation lives of the assets are too long.

Level 1 assets is a broad category of assets and applies to financial instruments,property,or lower of cost or market considerations for inventory,loans,or receivables.