Question 1

Accounting principles allow goodwill to be held on the books of a company indefinitely and not amortized over time.

Accepted Answer

A) True 
 B)False

Question 2

Which one of the following procedures is most appropriate for testing proper authorization for major capital projects?

Accepted Answer

A) examination of proper recording of the equipment. 
B) examination of board of directors minutes. 
C) examination of the cash budget. 
D) examination of useful lives. 
A) examination of proper recording of the equipment. 
B) examination of board of directors minutes. 
C) examination of the cash budget. 
D) examination of useful lives.

Question 3

Which of the following meets the criteria for a capitalized lease under GAAP in the U.S.?

Accepted Answer

A) The present value of the future minimum payments is $90,000 and the fair value is $110,000. 
B) The lessee can purchase the asset for an amount that is greater than fair vale at the end of the lease. 
C) The lease term is ten years and the useful life of the asset is 11 years. 
D) Title does not transfer by the end of the lease term. 
A) The present value of the future minimum payments is $90,000 and the fair value is $110,000. 
B) The lessee can purchase the asset for an amount that is greater than fair vale at the end of the lease. 
C) The lease term is ten years and the useful life of the asset is 11 years. 
D) Title does not transfer by the end of the lease term.

Question 4

Leases that qualify as operating are expensed as rent each period.

Accepted Answer

A) True 
 B)False

Question 5

The auditor performs tests on property,plant and equipment to determine if assets have been pledged as collateral or title has transferred primarily to assess which assertions?

Accepted Answer

A) Valuation and completeness. 
B) Rights and disclosure. 
C) Obligations and legality. 
D) Cutoff and accuracy. 
A) Valuation and completeness. 
B) Rights and disclosure. 
C) Obligations and legality. 
D) Cutoff and accuracy.

Question 6

Title transfer by the end of a lease is one of the criteria for capital lease recognition.

Accepted Answer

A) True 
 B)False

Question 7

A first-time audit of the property,plant,and equipment accounts will involve additional work on the part of the auditor to test the opening balances.

Accepted Answer

A) True 
 B)False

Question 8

Decommission costs for fixed assets,e.g. ,a power plant,must be recognized over what period of time?

Accepted Answer

A) when the plant is built. 
B) over the life of the plant. 
C) when the plant is decommissioned. 
D) Either B or C is acceptable. 
A) when the plant is built. 
B) over the life of the plant. 
C) when the plant is decommissioned. 
D) Either B or C is acceptable.

Question 9

The tour of the manufacturing plant may best assist the auditor in identifying which of the following?

Accepted Answer

A) that all purchases are authorized. 
B) machinery that is inoperative in the production cycle. 
C) management's impairment strategy. 
D) estimates of depreciation expense. 
A) that all purchases are authorized. 
B) machinery that is inoperative in the production cycle. 
C) management's impairment strategy. 
D) estimates of depreciation expense.

Question 10

An auditor wishes to test the net valuation of the equipment in the financial statements of a client.How will the auditor best perform this testing?

Accepted Answer

A) Vouch the recorded equipment to an invoice supporting the cost of the equipment when originally purchased. 
B) Compare the ID number on the fixed asset schedule to the identification tag on the asset itself. 
C) Recalculate annual depreciation expense for major additions and a sample of all other equipment. 
D) Confirm material equipment with customers. 
A) Vouch the recorded equipment to an invoice supporting the cost of the equipment when originally purchased. 
B) Compare the ID number on the fixed asset schedule to the identification tag on the asset itself. 
C) Recalculate annual depreciation expense for major additions and a sample of all other equipment. 
D) Confirm material equipment with customers.

Question 11

Asset losses or impairment are recognized when they occur,while asset gains are not recognized until realized.

Accepted Answer

A) True 
 B)False

Question 12

The first-time audit of a company with property,plant,and equipment may cause the auditor to do which of the following?

Accepted Answer

A) request a complete physical inventory of the certain items in the account. 
B) start fresh with an audit as of the end of the period. 
C) send a confirmation to a sample of equipment suppliers. 
D) review original invoices of immaterial equipment purchased during the period. 
A) request a complete physical inventory of the certain items in the account. 
B) start fresh with an audit as of the end of the period. 
C) send a confirmation to a sample of equipment suppliers. 
D) review original invoices of immaterial equipment purchased during the period.

Question 13

Analytical review 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 assets. 
B) fixed assets as a percentage of previous year assets. 
C) depreciation expense as a percentage of assets each year. 
D) average age of assets. 
A) current depreciation as a percentage of previous year assets. 
B) fixed assets as a percentage of previous year assets. 
C) depreciation expense as a percentage of assets each year. 
D) average age of assets.

Question 14

The cost of defending patents may not be capitalized.

Accepted Answer

A) True 
 B)False

Question 15

The auditor should determine whether property and equipment have reasonable useful lives.

Accepted Answer

A) True 
 B)False

Accounting principles allow goodwill to be held on the books of a company indefinitely and not amortized over time.

Which one of the following procedures is most appropriate for testing proper authorization for major capital projects?

Which of the following meets the criteria for a capitalized lease under GAAP in the U.S.?

Leases that qualify as operating are expensed as rent each period.

The auditor performs tests on property,plant and equipment to determine if assets have been pledged as collateral or title has transferred primarily to assess which assertions?

Title transfer by the end of a lease is one of the criteria for capital lease recognition.

A first-time audit of the property,plant,and equipment accounts will involve additional work on the part of the auditor to test the opening balances.

Decommission costs for fixed assets,e.g. ,a power plant,must be recognized over what period of time?

The tour of the manufacturing plant may best assist the auditor in identifying which of the following?

An auditor wishes to test the net valuation of the equipment in the financial statements of a client.How will the auditor best perform this testing?

Asset losses or impairment are recognized when they occur,while asset gains are not recognized until realized.

The first-time audit of a company with property,plant,and equipment may cause the auditor to do which of the following?

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

The cost of defending patents may not be capitalized.

The auditor should determine whether property and equipment have reasonable useful lives.

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

Accounting principles allow goodwill to be held on the books of a company indefinitely and not amortized over time.

Which one of the following procedures is most appropriate for testing proper authorization for major capital projects?

Which of the following meets the criteria for a capitalized lease under GAAP in the U.S.?

Leases that qualify as operating are expensed as rent each period.

The auditor performs tests on property,plant and equipment to determine if assets have been pledged as collateral or title has transferred primarily to assess which assertions?

Title transfer by the end of a lease is one of the criteria for capital lease recognition.

A first-time audit of the property,plant,and equipment accounts will involve additional work on the part of the auditor to test the opening balances.

Decommission costs for fixed assets,e.g. ,a power plant,must be recognized over what period of time?

The tour of the manufacturing plant may best assist the auditor in identifying which of the following?

An auditor wishes to test the net valuation of the equipment in the financial statements of a client.How will the auditor best perform this testing?

Asset losses or impairment are recognized when they occur,while asset gains are not recognized until realized.

The first-time audit of a company with property,plant,and equipment may cause the auditor to do which of the following?

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

The cost of defending patents may not be capitalized.

The auditor should determine whether property and equipment have reasonable useful lives.

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