Question 1

As natural resources are used up the client has to recognize which of the following?

Accepted Answer

A) depreciation expense. 
B) depletion expense. 
C) amortization expense. 
D) reclamation expense. 
A) depreciation expense. 
B) depletion expense. 
C) amortization expense. 
D) reclamation expense. B

Question 2

Auditors often recalculate the present value of capital lease agreements to assess the valuation of recorded liabilities.

Accepted Answer

A) True 
 B)False  True

Question 3

The auditor should be aware of the possibility that management may be manipulating earnings by inappropriately expensing capital items or inappropriately capitalizing expense items.

Accepted Answer

A) True 
 B)False  True

Question 4

Cloud Company determines that the future undiscounted cash flow generated from the use of its fleet of small aircraft are less than carrying values.For impairment purposes,an auditor would wish to further obtain evidence regarding which of the following?

Accepted Answer

A) parts inventory for the aircraft. 
B) an economic outlook for the company's stock. 
C) an independent valuation of the aircraft. 
D) the historical cost of the aircraft. 
A) parts inventory for the aircraft. 
B) an economic outlook for the company's stock. 
C) an independent valuation of the aircraft. 
D) the historical cost of the aircraft.

Question 5

The auditor typically tests management's estimate of the impaired value of a fixed asset through the analysis of the future undiscounted cash flows of the asset.

Accepted Answer

A) True 
 B)False

Question 6

Capital leases
Identify the four criteria that have been provided under U.S.GAAP that the auditor will use to assess capital lease treatment.

Accepted Answer

If any of the following four criteria pr

Question 7

As it relates to property,plant and equipment,what specific risk relating to earnings management do the auditors assess?

Accepted Answer

A) Equipment has been initially recorded at cost. 
B) Depreciation has been recorded using accelerated methods. 
C) Repairs and maintenance have been expensed rather than included as assets. 
D) Useful lives have been extended without justification. 
A) Equipment has been initially recorded at cost. 
B) Depreciation has been recorded using accelerated methods. 
C) Repairs and maintenance have been expensed rather than included as assets. 
D) Useful lives have been extended without justification.

Question 8

Repairs and maintenance
Why would the auditor be concerned about the repairs and maintenance account in relation to property plant and equipment?

Accepted Answer

Some clients might be motivated to recor

Question 9

In a tour of a client's manufacturing facility,the auditor is most likely attempting to satisfy the which of the following assertions related to long-lived assets?

Accepted Answer

A) cutoff. 
B) existence. 
C) rights. 
D) presentation. 
A) cutoff. 
B) existence. 
C) rights. 
D) presentation.

Question 10

An auditor will read the footnotes related to discontinued operations to ensure that,among other things,the justification of the decision and the write-down of assets are adequately disclosed.

Accepted Answer

A) True 
 B)False

Question 11

A test of controls to determine proper authorization for the addition of a major piece of equipment would include all of the following except

Accepted Answer

A) examination of purchase agreements. 
B) review of minutes of the board of directors' meetings. 
C) review of approvals by a capital budgeting committee. 
D) examination of the identification tags attached to equipment. 
A) examination of purchase agreements. 
B) review of minutes of the board of directors' meetings. 
C) review of approvals by a capital budgeting committee. 
D) examination of the identification tags attached to equipment.

Question 12

Companies always enter into lease agreements to finance the purchase of expensive assets over time.

Accepted Answer

A) True 
 B)False

Question 13

Which is the primary assertion tested in conjunction with the obtaining of evidence regarding impairment?

Accepted Answer

A) Valuation. 
B) Cutoff. 
C) Existence. 
D) Rights. 
A) Valuation. 
B) Cutoff. 
C) Existence. 
D) Rights.

Question 14

If the audit team notes the client has made a significant change in its product line which requires that new equipment be purchased,that may be an indication of

Accepted Answer

A) book value. 
B) scrap value. 
C) impaired value. 
D) depreciation value. 
A) book value. 
B) scrap value. 
C) impaired value. 
D) depreciation value.

Question 15

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

Accepted Answer

A) asset depreciation. 
B) asset amortization. 
C) asset impairment. 
D) asset disposal. 
A) asset depreciation. 
B) asset amortization. 
C) asset impairment. 
D) asset disposal.

Question 16

Which one of the following procedures would provide the best evidence about the original cost of a piece of equipment?

Accepted Answer

A) fixed asset schedule 
B) purchase invoice 
C) receiving report 
D) inquiry of the purchasing agent 
A) fixed asset schedule 
B) purchase invoice 
C) receiving report 
D) inquiry of the purchasing agent

Question 17

It is simple for auditors to test the costs capitalized for discovery of natural resources because only successful efforts may be recorded

Accepted Answer

A) True 
 B)False

Question 18

Knowledge of business conditions is not crucial to the auditor's identification of the potential for impairment of assets as the auditor must focus attention on the accounting rules.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following procedures would evidence the client's control over the existence of machinery and equipment?

Accepted Answer

A) Useful lives are only entered into the system by the controller. 
B) Impairment testing takes place in accordance with a formal assessment of business changes and events as they relate to fixed assets. 
C) Fixed assets are assigned a control identification number and that number is permanently affixed to the asset for periodic inventory. 
D) Only the CFO can enter additions into the fixed asset module of the system. 
A) Useful lives are only entered into the system by the controller. 
B) Impairment testing takes place in accordance with a formal assessment of business changes and events as they relate to fixed assets. 
C) Fixed assets are assigned a control identification number and that number is permanently affixed to the asset for periodic inventory. 
D) Only the CFO can enter additions into the fixed asset module of the system.

Question 20

An estimate of the reasonableness of depreciation expense and accumulated depreciation may be accomplished by performing which of the following?

Accepted Answer

A) tests of controls. 
B) substantive tests of transactions. 
C) analytical review procedures. 
D) management inquiry. 
A) tests of controls. 
B) substantive tests of transactions. 
C) analytical review procedures. 
D) management inquiry.

As natural resources are used up the client has to recognize which of the following?

Auditors often recalculate the present value of capital lease agreements to assess the valuation of recorded liabilities.

The auditor should be aware of the possibility that management may be manipulating earnings by inappropriately expensing capital items or inappropriately capitalizing expense items.

Cloud Company determines that the future undiscounted cash flow generated from the use of its fleet of small aircraft are less than carrying values.For impairment purposes,an auditor would wish to further obtain evidence regarding which of the following?

The auditor typically tests management's estimate of the impaired value of a fixed asset through the analysis of the future undiscounted cash flows of the asset.

Capital leases Identify the four criteria that have been provided under U.S.GAAP that the auditor will use to assess capital lease treatment.

As it relates to property,plant and equipment,what specific risk relating to earnings management do the auditors assess?

Repairs and maintenance Why would the auditor be concerned about the repairs and maintenance account in relation to property plant and equipment?

In a tour of a client's manufacturing facility,the auditor is most likely attempting to satisfy the which of the following assertions related to long-lived assets?

An auditor will read the footnotes related to discontinued operations to ensure that,among other things,the justification of the decision and the write-down of assets are adequately disclosed.

A test of controls to determine proper authorization for the addition of a major piece of equipment would include all of the following except

Companies always enter into lease agreements to finance the purchase of expensive assets over time.

Which is the primary assertion tested in conjunction with the obtaining of evidence regarding impairment?

If the audit team notes the client has made a significant change in its product line which requires that new equipment be purchased,that may be an indication of

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

Which one of the following procedures would provide the best evidence about the original cost of a piece of equipment?

It is simple for auditors to test the costs capitalized for discovery of natural resources because only successful efforts may be recorded

Knowledge of business conditions is not crucial to the auditor's identification of the potential for impairment of assets as the auditor must focus attention on the accounting rules.

Which of the following procedures would evidence the client's control over the existence of machinery and equipment?

An estimate of the reasonableness of depreciation expense and accumulated depreciation may be accomplished by performing which of the following?

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters

Exam 13: Audit of Long-Lived Assets and Related Expense Accounts

As natural resources are used up the client has to recognize which of the following?

Auditors often recalculate the present value of capital lease agreements to assess the valuation of recorded liabilities.

The auditor should be aware of the possibility that management may be manipulating earnings by inappropriately expensing capital items or inappropriately capitalizing expense items.

Cloud Company determines that the future undiscounted cash flow generated from the use of its fleet of small aircraft are less than carrying values.For impairment purposes,an auditor would wish to further obtain evidence regarding which of the following?

The auditor typically tests management's estimate of the impaired value of a fixed asset through the analysis of the future undiscounted cash flows of the asset.

Capital leases Identify the four criteria that have been provided under U.S.GAAP that the auditor will use to assess capital lease treatment.

As it relates to property,plant and equipment,what specific risk relating to earnings management do the auditors assess?

Repairs and maintenance Why would the auditor be concerned about the repairs and maintenance account in relation to property plant and equipment?

In a tour of a client's manufacturing facility,the auditor is most likely attempting to satisfy the which of the following assertions related to long-lived assets?

An auditor will read the footnotes related to discontinued operations to ensure that,among other things,the justification of the decision and the write-down of assets are adequately disclosed.

A test of controls to determine proper authorization for the addition of a major piece of equipment would include all of the following except

Companies always enter into lease agreements to finance the purchase of expensive assets over time.

Which is the primary assertion tested in conjunction with the obtaining of evidence regarding impairment?

If the audit team notes the client has made a significant change in its product line which requires that new equipment be purchased,that may be an indication of

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

Which one of the following procedures would provide the best evidence about the original cost of a piece of equipment?

It is simple for auditors to test the costs capitalized for discovery of natural resources because only successful efforts may be recorded

Knowledge of business conditions is not crucial to the auditor's identification of the potential for impairment of assets as the auditor must focus attention on the accounting rules.

Which of the following procedures would evidence the client's control over the existence of machinery and equipment?

An estimate of the reasonableness of depreciation expense and accumulated depreciation may be accomplished by performing which of the following?

Auditing: Integral to the Economy

Corporate Governance and Audits

Judgmental and Ethical Decision-Making Frameworks and Associated Professional Standards

Audit Risk,business Risk,and Audit Planning

Internal Control Over Financial Reporting

Performing an Integrated Audit

A Framework for Audit Evidence

Tools Used in Gathering Audit Evidence

Auditing for Fraud

Auditing Revenue and Related Accounts

Audit of Acquisition and Payment Cycle and Inventory

Audit of Cash and Other Liquid Assets

Audit of Longer-Term Liabilities, equity, acquisitions, and Related-Entity Transactions, long-Term Liabilities, and Equity

Ensuring Audit Quality in Completing the Audit

Auditors Reports

Professional Liability

Advanced Topics Concerning Complex Audit Judgments

Filters