Question 1

A bargain purchase option is a good indicator that an arrangement should be accounted for as an operating lease.

Accepted Answer

A) True 
 B)False

Question 2

Changes in the ages of equipment may be identified by analyzing depreciation expense as a percent of assets.

Accepted Answer

A) True 
 B)False

Question 3

All of the following represent risks associated with fixed assets and related expenses except

Accepted Answer

A) Incomplete recording of asset disposals 
B) Environmental liabilities or claims related to violations of safety and protection regulations 
C) Failure to properly recognize impairment in value 
D) All represent risks 
A) Incomplete recording of asset disposals 
B) Environmental liabilities or claims related to violations of safety and protection regulations 
C) Failure to properly recognize impairment in value 
D) All represent risks

Question 4

In the audit of the depreciation methods and possible impairment of manufacturing equipment,the auditor tours the facility during operations to determine if any of the machines are idle.

Accepted Answer

A) True 
 B)False

Question 5

The accounting for leases is often misapplied in order to achieve off-balance sheet financing.

Accepted Answer

A) True 
 B)False

Question 6

Which one of the following is not a risk associated with property,plant,and equipment.

Accepted Answer

A) obsolescence of assets 
B) impairment of assets 
C) incomplete recording of disposals 
D) sum-of-years digits depreciation 
A) obsolescence of assets 
B) impairment of assets 
C) incomplete recording of disposals 
D) sum-of-years digits depreciation

Question 7

Internal controls over fixed assets should ensure that all purchases are authorized.

Accepted Answer

A) True 
 B)False

Question 8

Reclamation expenses associated with the use of the land in a mining operation should be estimated,accrued,and allocated to depletion costs over time.

Accepted Answer

A) True 
 B)False

Question 9

The audit of the repairs and maintenance expense account is extremely important as it helps the auditor to determine if

Accepted Answer

A) depreciation expense includes charges for repairs. 
B) the net book value of assets achieves precision. 
C) items that should be included as assets are charged as expenses. 
D) all repairs and maintenance expenses add value to the assets. 
A) depreciation expense includes charges for repairs. 
B) the net book value of assets achieves precision. 
C) items that should be included as assets are charged as expenses. 
D) all repairs and maintenance expenses add value to the assets.

Question 10

The auditor would be most likely to request a schedule of repairs and maintenance expense to satisfy the auditor about the completeness assertion for fixed assets.

Accepted Answer

A) True 
 B)False

Question 11

Property plant & equipment evidence - additions
Specify the evidence the auditor would review to satisfy himself or herself about each of the following assertions concerning property,plant,and equipment additions.
 A. I Muntion athit tarichl cast.
B. Firistance.
C. Prafantation an talnare shest
D. Riphts.

Accepted Answer

A. Examine vendor invoices and c anceled

Question 12

Analytical procedures for depreciation expense and accumulated depreciation would include all of the following ratios except

Accepted Answer

A) current depreciation as a percentage of previous year depreciation. 
B) fixed assets as a percentage of previous year assets. 
C) accumulated depreciation as a percentage of gross assets each year. 
D) average cost of assets. 
A) current depreciation as a percentage of previous year depreciation. 
B) fixed assets as a percentage of previous year assets. 
C) accumulated depreciation as a percentage of gross assets each year. 
D) average cost of assets.

Question 13

Improper recording of a capital lease as an operating lease is an inherent risk associated with the audit of property,plant,and equipment.

Accepted Answer

A) True 
 B)False

Question 14

Which one of the following does not constitute probable relationships between accounts?

Accepted Answer

A) Equipment and depreciation. 
B) Patent and amortization. 
C) Assets under capital leases and amortization. 
D) Oil reserves and depreciation. 
A) Equipment and depreciation. 
B) Patent and amortization. 
C) Assets under capital leases and amortization. 
D) Oil reserves and depreciation.

Question 15

Property,plant and equipment is written down when its value becomes impaired and may be written back up if its value go up at a later date.

Accepted Answer

A) True 
 B)False

Question 16

If a lease does not meet at least one of four conditions described in U.S.GAAP,then it is classified as which of the following?

Accepted Answer

A) capital lease. 
B) operating lease. 
C) direct financing lease. 
D) sales-type lease. 
A) capital lease. 
B) operating lease. 
C) direct financing lease. 
D) sales-type lease.

Question 17

Once the auditor obtains a fixed asset additions schedule from the client,testing of the existence of the additions must immediately ensue to ensure effectiveness.

Accepted Answer

A) True 
 B)False

Question 18

The best approach to determine whether a capital lease has been "kept off the books" is to do which of the following?

Accepted Answer

A) review all capital lease agreements that have been recorded. 
B) examine the canceled checks for all recorded capital leases. 
C) review all major lease agreements to determine whether there are other leases to be capitalized. 
D) physically examine the asset and trace it to the general ledger. 
A) review all capital lease agreements that have been recorded. 
B) examine the canceled checks for all recorded capital leases. 
C) review all major lease agreements to determine whether there are other leases to be capitalized. 
D) physically examine the asset and trace it to the general ledger.

Question 19

A major risk associated with property,plant,and equipment is that of the innovative methods of manipulating earnings by recording invalid amounts to asset accounts.

Accepted Answer

A) True 
 B)False

Question 20

U.S.accounting principles require that lease agreements are treated as capital leases if all of the four criteria apply.

Accepted Answer

A) True 
 B)False

A bargain purchase option is a good indicator that an arrangement should be accounted for as an operating lease.

Changes in the ages of equipment may be identified by analyzing depreciation expense as a percent of assets.

All of the following represent risks associated with fixed assets and related expenses except

In the audit of the depreciation methods and possible impairment of manufacturing equipment,the auditor tours the facility during operations to determine if any of the machines are idle.

The accounting for leases is often misapplied in order to achieve off-balance sheet financing.

Which one of the following is not a risk associated with property,plant,and equipment.

Internal controls over fixed assets should ensure that all purchases are authorized.

Reclamation expenses associated with the use of the land in a mining operation should be estimated,accrued,and allocated to depletion costs over time.

The audit of the repairs and maintenance expense account is extremely important as it helps the auditor to determine if

The auditor would be most likely to request a schedule of repairs and maintenance expense to satisfy the auditor about the completeness assertion for fixed assets.

Analytical procedures for depreciation expense and accumulated depreciation would include all of the following ratios except

Improper recording of a capital lease as an operating lease is an inherent risk associated with the audit of property,plant,and equipment.

Which one of the following does not constitute probable relationships between accounts?

Property,plant and equipment is written down when its value becomes impaired and may be written back up if its value go up at a later date.

If a lease does not meet at least one of four conditions described in U.S.GAAP,then it is classified as which of the following?

Once the auditor obtains a fixed asset additions schedule from the client,testing of the existence of the additions must immediately ensue to ensure effectiveness.

The best approach to determine whether a capital lease has been "kept off the books" is to do which of the following?

A major risk associated with property,plant,and equipment is that of the innovative methods of manipulating earnings by recording invalid amounts to asset accounts.

U.S.accounting principles require that lease agreements are treated as capital leases if all of the four criteria apply.

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

A bargain purchase option is a good indicator that an arrangement should be accounted for as an operating lease.

Changes in the ages of equipment may be identified by analyzing depreciation expense as a percent of assets.

All of the following represent risks associated with fixed assets and related expenses except

In the audit of the depreciation methods and possible impairment of manufacturing equipment,the auditor tours the facility during operations to determine if any of the machines are idle.

The accounting for leases is often misapplied in order to achieve off-balance sheet financing.

Which one of the following is not a risk associated with property,plant,and equipment.

Internal controls over fixed assets should ensure that all purchases are authorized.

Reclamation expenses associated with the use of the land in a mining operation should be estimated,accrued,and allocated to depletion costs over time.

The audit of the repairs and maintenance expense account is extremely important as it helps the auditor to determine if

The auditor would be most likely to request a schedule of repairs and maintenance expense to satisfy the auditor about the completeness assertion for fixed assets.

Analytical procedures for depreciation expense and accumulated depreciation would include all of the following ratios except

Improper recording of a capital lease as an operating lease is an inherent risk associated with the audit of property,plant,and equipment.

Which one of the following does not constitute probable relationships between accounts?

Property,plant and equipment is written down when its value becomes impaired and may be written back up if its value go up at a later date.

If a lease does not meet at least one of four conditions described in U.S.GAAP,then it is classified as which of the following?

Once the auditor obtains a fixed asset additions schedule from the client,testing of the existence of the additions must immediately ensue to ensure effectiveness.

The best approach to determine whether a capital lease has been "kept off the books" is to do which of the following?

A major risk associated with property,plant,and equipment is that of the innovative methods of manipulating earnings by recording invalid amounts to asset accounts.

U.S.accounting principles require that lease agreements are treated as capital leases if all of the four criteria apply.

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