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

Intangible assets - patents Define what is meant by the term intangible asset,provide an example,and identify typical controls over intangible assets.

When performing planning analytical procedures related to long-lived assets,which of the following should the auditor compare the unaudited financial statements with?

Goodwill has to be evaluated for impairment once a year,as well as on an interim basis at the time events and circumstances warrant.

Asset impairment Describe what is meant by asset impairment and identify the sources of inherent risks related to asset

Audit firms that have developed standardized programs for auditing long-lived assets do not need to customize the audit programs based on assessed risk of material misstatement because inherent risks related to long-lived assets are the same for all clients.

Control Risks What are some typical controls that affect multiple assertions for long-lived assets?

The risk of material misstatement related to the existence of long-lived assets at Client A is considered low,while this risk at Client B is considered high.Sufficiency of evidence for testing the existence of equipment would be higher for client B.

Which one of the following is not a management assertion relevant to long-lived assets?

After a natural resource such as gas or coal is used up by the client,the client is responsible for restoring the land to its original condition.What is the cost of this restoration called?

To identify possible impairment of manufacturing equipment,the auditor can tour the facility during operations to determine if any of the machines are idle.

Which one of the following approaches does not represent how the auditor will become aware of risks associated with long-lived assets?

Which statement is true about a company's choice of capitalization policy?

Assume that the audit team notes the client has made a significant change in its product line which requires that new equipment be purchased.Which of the following would be of greatest concern to the auditor?

An auditor is required to gain an overall understanding of internal controls related to long-lived assets for integrated audits,but not for financial statement only audits.

Long-lived assets include only the tangible assets of an organization.

The existence of fair value estimates that are unreasonable or unsupportable is indicative of a potential fraud scheme.