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

Useful methods to evaluate asset impairment of long-lived assets usually would not include which of the following?

The auditor should perform detailed tests of labor charges when the client company constructs its own assets.

When a company decides to dispose of a particular line of operation by selling it to another company,the related assets should

Audit approach for lease Describe the general audit approach for leases.

Strong internal control activities in the fixed assets cycle include the use of identification tags secured to assets for proper tracking.

Intangible assets are amortized over the remaining legal life of patents or copyrights associated with the asset or their useful life.

The auditor must be aware of management's motivations to present financial information in a certain light when leases are utilized.

The auditor should be aware of material asset additions that are in remote locations and physically observe such assets.

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

Management may determine that an asset is impaired through the use of which of the following?

If the auditor determines that beginning balances of fixed assets have not changed from previously audited amounts,much of the testing for existence can be accomplished by which of the following?

Auditors test management's estimates of impaired value through reference to which of the following?

Periodically clients discontinue a particular line of operation by shutting down or selling a line of business or a company,which usually occurs over at least several months.In these situations the client is to write down net assets to a best estimate of net realizable value and do which of the following?

When testing a client's additions to an asset for research and development,the auditor must remember that such costs should be amortized over the lesser of their legal lives or useful lives.

Earnings management Describe earnings management by an organization and discuss the implications of fixed asset accounting on earnings management.

A corporation should always anticipate and record gains on the disposal of assets.

Capitalized natural resources,e.g. ,oil or coal,are usually written off over what period of time?

If the beginning balance of property,plant and equipment is established through previous audit work,the test of property accounts usually can be limited to selected tests of property additions and disposals during the year.

When testing fixed assets for the reasonableness of the client's estimated useful lives,the audit team should do which of the following?

In testing property,plant and equipment the scope and extent of testing can vary based on the complexity of assets utilized,the difficulty of estimating useful life,and the risk associated with the client.