Question 1

Asset impairment is assessed by the audit team for assets in the manufacturing environment,but not for office equipment and buildings.

Accepted Answer

A) True 
 B)False

Question 2

Auditors will perform an analysis of leases using FAS Statement No.13 and FASB ASC 840 criteria to substantiate the accounting treatment.

Accepted Answer

A) True 
 B)False

Question 3

Analytical estimation of depreciation by the auditor is an important audit test because it does which of the following?

Accepted Answer

A) it signals which additions will be vouched. 
B) it yields statistical precision in sampling. 
C) it is a good starting point for determining additional procedures. 
D) it gives the auditor an indication of the impaired balances existing in financial statements. 
A) it signals which additions will be vouched. 
B) it yields statistical precision in sampling. 
C) it is a good starting point for determining additional procedures. 
D) it gives the auditor an indication of the impaired balances existing in financial statements.

Question 4

The auditor would conclude that the client was not depreciating the cost of fixed assets rapidly enough if there were a large number of losses on the disposals of assets.

Accepted Answer

A) True 
 B)False

Question 5

In evaluating control risk and effectiveness for intangible assets,controls should be designed for numerous purposes.Which of the following is not a usual control for intangible assets?

Accepted Answer

A) ensure that decisions are appropriately made as to when to capitalize or expense research and development expenditures. 
B) develop amortization schedules that reflect the remaining useful life of patents or copyrights associated with the assets. 
C) identify and account for intangible asset impairment. 
D) all of the above are usual controls for intangible assets. 
A) ensure that decisions are appropriately made as to when to capitalize or expense research and development expenditures. 
B) develop amortization schedules that reflect the remaining useful life of patents or copyrights associated with the assets. 
C) identify and account for intangible asset impairment. 
D) all of the above are usual controls for intangible assets.

Question 6

Asset impairment is not typically assessed by the independent auditor,but is assessed by the internal auditor.

Accepted Answer

A) True 
 B)False

Question 7

The client should have methods in place to identify the impairment of significant assets.

Accepted Answer

A) True 
 B)False

Question 8

The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal.This audit steps primarily tests which of the following assertions for the equipment account?

Accepted Answer

A) existence assertion. 
B) presentation assertion. 
C) rights assertion. 
D) valuation assertion. 
A) existence assertion. 
B) presentation assertion. 
C) rights assertion. 
D) valuation assertion.

Question 9

Companies often increase depreciation and impairment expenses through manipulation in order to increase profits.

Accepted Answer

A) True 
 B)False

Question 10

Which method might an auditor utilize in testing depletion expense?

Accepted Answer

A) using analytical procedures. 
B) observation of the physical count. 
C) obtaining management representation. 
D) estimating the useful life of the natural resource. 
A) using analytical procedures. 
B) observation of the physical count. 
C) obtaining management representation. 
D) estimating the useful life of the natural resource.

Question 11

Leases in the U.S.should be capitalized on the books of the client if it meets one of four conditions.Which of the following is not one of those four conditions.

Accepted Answer

A) the lease contract transfers ownership. 
B) the lease contains a bargain purchase option. 
C) the lease term covers at least 80% of the useful life of the asset. 
D) the present value of the minimum lease payments is at least equal to 90% of the assets fair market value. 
A) the lease contract transfers ownership. 
B) the lease contains a bargain purchase option. 
C) the lease term covers at least 80% of the useful life of the asset. 
D) the present value of the minimum lease payments is at least equal to 90% of the assets fair market value.

Question 12

When a decision is made to discontinue an operation,the net assets should be written down to a best estimate of net realizable value.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is the best example of a fixed asset that will be physically inspected by the auditor in the period under audit?

Accepted Answer

A) An adding machine acquired in the current period. 
B) A warehouse purchased three years previously. 
C) An office building constructed in the current period. 
D) Desktop computers purchased in the previous period. 
A) An adding machine acquired in the current period. 
B) A warehouse purchased three years previously. 
C) An office building constructed in the current period. 
D) Desktop computers purchased in the previous period.

Question 14

Bluewire Technologies,Inc.obtained a patent for its MegaK2000 product five years ago and should expense the entire amount of the unamortized balance if MegaK2000 is no longer sold.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following represents a primary audit concern for errors in the recording of intangible assets?

Accepted Answer

A) Capitalized research and development costs. 
B) Amortization of patents. 
C) Capitalized costs to successfully defend a patent. 
D) Amortization of franchise fees. 
A) Capitalized research and development costs. 
B) Amortization of patents. 
C) Capitalized costs to successfully defend a patent. 
D) Amortization of franchise fees.

Question 16

Gains on the sale of equipment usually signal the auditor that the lives of the assets are too long.

Accepted Answer

A) True 
 B)False

Question 17

In evaluating control risk and effectiveness for fixed assets,controls should be designed for numerous purposes.Which of the following is not a usual control for fixed assets?

Accepted Answer

A) identify existing assets,inventory them,and reconcile physical inventory with the property ledger. 
B) periodically reassess the appropriateness of depletion categories. 
C) identify obsolete or scrapped equipment and write it down to scrap value. 
D) periodically review management strategy and systematically assess the impairment of assets. 
E) all of the above are usual controls for fixed assets. 
A) identify existing assets,inventory them,and reconcile physical inventory with the property ledger. 
B) periodically reassess the appropriateness of depletion categories. 
C) identify obsolete or scrapped equipment and write it down to scrap value. 
D) periodically review management strategy and systematically assess the impairment of assets. 
E) all of the above are usual controls for fixed assets.

Question 18

Asset impairment
Describe what asset impairment is,why the auditor is concerned about it,and how it is dealt with by the auditor.

Accepted Answer

Asset impairment deals with management's

Question 19

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?

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.

Question 20

Intangible assets - patents
Discuss what an intangible asset is and some audit procedures concerning patents that the auditor might use in connection with it.

Accepted Answer

An intangible asset is one that lacks ph

Asset impairment is assessed by the audit team for assets in the manufacturing environment,but not for office equipment and buildings.

Auditors will perform an analysis of leases using FAS Statement No.13 and FASB ASC 840 criteria to substantiate the accounting treatment.

Analytical estimation of depreciation by the auditor is an important audit test because it does which of the following?

The auditor would conclude that the client was not depreciating the cost of fixed assets rapidly enough if there were a large number of losses on the disposals of assets.

In evaluating control risk and effectiveness for intangible assets,controls should be designed for numerous purposes.Which of the following is not a usual control for intangible assets?

Asset impairment is not typically assessed by the independent auditor,but is assessed by the internal auditor.

The client should have methods in place to identify the impairment of significant assets.

The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal.This audit steps primarily tests which of the following assertions for the equipment account?

Companies often increase depreciation and impairment expenses through manipulation in order to increase profits.

Which method might an auditor utilize in testing depletion expense?

Leases in the U.S.should be capitalized on the books of the client if it meets one of four conditions.Which of the following is not one of those four conditions.

When a decision is made to discontinue an operation,the net assets should be written down to a best estimate of net realizable value.

Which of the following is the best example of a fixed asset that will be physically inspected by the auditor in the period under audit?

Bluewire Technologies,Inc.obtained a patent for its MegaK2000 product five years ago and should expense the entire amount of the unamortized balance if MegaK2000 is no longer sold.

Which of the following represents a primary audit concern for errors in the recording of intangible assets?

Gains on the sale of equipment usually signal the auditor that the lives of the assets are too long.

In evaluating control risk and effectiveness for fixed assets,controls should be designed for numerous purposes.Which of the following is not a usual control for fixed assets?

Asset impairment Describe what asset impairment is,why the auditor is concerned about it,and how it is dealt with by the auditor.

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?

Intangible assets - patents Discuss what an intangible asset is and some audit procedures concerning patents that the auditor might use in connection with it.

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

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

Asset impairment is assessed by the audit team for assets in the manufacturing environment,but not for office equipment and buildings.

Auditors will perform an analysis of leases using FAS Statement No.13 and FASB ASC 840 criteria to substantiate the accounting treatment.

Analytical estimation of depreciation by the auditor is an important audit test because it does which of the following?

The auditor would conclude that the client was not depreciating the cost of fixed assets rapidly enough if there were a large number of losses on the disposals of assets.

In evaluating control risk and effectiveness for intangible assets,controls should be designed for numerous purposes.Which of the following is not a usual control for intangible assets?

Asset impairment is not typically assessed by the independent auditor,but is assessed by the internal auditor.

The client should have methods in place to identify the impairment of significant assets.

The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal.This audit steps primarily tests which of the following assertions for the equipment account?

Companies often increase depreciation and impairment expenses through manipulation in order to increase profits.

Which method might an auditor utilize in testing depletion expense?

Leases in the U.S.should be capitalized on the books of the client if it meets one of four conditions.Which of the following is not one of those four conditions.

When a decision is made to discontinue an operation,the net assets should be written down to a best estimate of net realizable value.

Which of the following is the best example of a fixed asset that will be physically inspected by the auditor in the period under audit?

Bluewire Technologies,Inc.obtained a patent for its MegaK2000 product five years ago and should expense the entire amount of the unamortized balance if MegaK2000 is no longer sold.

Which of the following represents a primary audit concern for errors in the recording of intangible assets?

Gains on the sale of equipment usually signal the auditor that the lives of the assets are too long.

In evaluating control risk and effectiveness for fixed assets,controls should be designed for numerous purposes.Which of the following is not a usual control for fixed assets?

Asset impairment Describe what asset impairment is,why the auditor is concerned about it,and how it is dealt with by the auditor.

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?

Intangible assets - patents Discuss what an intangible asset is and some audit procedures concerning patents that the auditor might use in connection with it.

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