Question 1

To be capitalized as part of property, plant and equipment, assets must:

Accepted Answer

A)  have expected useful lives of more than one year. 
B)  not be acquired for resale. 
C)  be useful in multiple productive capacities within the organization. 
D)  A and B, but not C. 
A)  have expected useful lives of more than one year. 
B)  not be acquired for resale. 
C)  be useful in multiple productive capacities within the organization. 
D)  A and B, but not C.

Question 2

The least helpful common audit test to verify current period acquisitions of property, plant, and equipment is examining vendors' invoices and receiving reports.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following audit procedures would be least likely to lead the auditor to find an unrecorded fixed asset disposal?

Accepted Answer

A)  Examination of insurance policies 
B)  Review of repairs and maintenance expense 
C)  Review of property tax files 
D)  Scanning of invoices for fixed asset additions 
A)  Examination of insurance policies 
B)  Review of repairs and maintenance expense 
C)  Review of property tax files 
D)  Scanning of invoices for fixed asset additions

Question 4

One of the auditor's primary objectives when auditing manufacturing equipment is completeness.

Accepted Answer

A) True 
 B)False

Question 5

Completeness and existence are the auditor's primary objectives in auditing manufacturing equipment.

Accepted Answer

A) True 
 B)False

Question 6

Improperly classifying a fixed asset by recording the amount in the repairs and maintenance expense account will have an effect on which of the following financial statements until the asset would normally have been depreciated?

Accepted Answer

A)  The balance sheet 
B)  The income statement 
C)  The cash flow statement 
D)  Both the income statement and the balance sheet 
A)  The balance sheet 
B)  The income statement 
C)  The cash flow statement 
D)  Both the income statement and the balance sheet

Question 7

In connection with a review of the prepaid insurance account, which of the following audit procedures would you be least likely to use?

Accepted Answer

A)  Recompute the portion of the premium that expired during the year. 
B)  Prepare excerpts of insurance policies for audit working papers. 
C)  Confirm premium rates with an independent insurance broker. 
D)  Examine support for premium payments. 
A)  Recompute the portion of the premium that expired during the year. 
B)  Prepare excerpts of insurance policies for audit working papers. 
C)  Confirm premium rates with an independent insurance broker. 
D)  Examine support for premium payments.

Question 8

What are several analytical procedures used in the audit of prepaid insurance and insurance expense?

Accepted Answer

1. Compare total prepaid insurance and i

Question 9

The failure to capitalize a permanent asset, or the recording of an asset acquisition at the improper amount, affects the balance sheet:

Accepted Answer

A)  forever. 
B)  for the current period. 
C)  for the depreciable life of the asset. 
D)  until the firm disposes of the asset. 
A)  forever. 
B)  for the current period. 
C)  for the depreciable life of the asset. 
D)  until the firm disposes of the asset.

Question 10

Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

Accepted Answer

A)  Examination of correspondence with the corporate counsel concerning acquisition matters. 
B)  Examination of ownership documents registered and on file at a public hall of records. 
C)  Examination of corporate minutes and resolutions concerning the approval to acquire property, plant, and equipment. 
D)  Examination of deeds and title guaranty policies on hand. 
A)  Examination of correspondence with the corporate counsel concerning acquisition matters. 
B)  Examination of ownership documents registered and on file at a public hall of records. 
C)  Examination of corporate minutes and resolutions concerning the approval to acquire property, plant, and equipment. 
D)  Examination of deeds and title guaranty policies on hand.

Question 11

When auditing acquisitions of property, plant, and equipment, the auditor's review of lease and rental agreements most closely relate to the cutoff objective.

Accepted Answer

A) True 
 B)False

Question 12

The primary accounting record for manufacturing equipment and other fixed assets is the:

Accepted Answer

A)  depreciation ledger. 
B)  fixed asset master file. 
C)  asset inventory. 
D)  equipment roster. 
A)  depreciation ledger. 
B)  fixed asset master file. 
C)  asset inventory. 
D)  equipment roster.

Question 13

The company's choices for fixed asset on the assets useful life and residual value impact the amount of depreciation recorded.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following would generally not be a component of the audit of the acquisition and payment cycle?

Accepted Answer

A)  Adequacy of controls over acquisitions of long-lived assets 
B)  Tracing disposals of long-lived assets to the Fixed Asset Master File 
C)  Determining the adequacy of the funds available for capital expenditures 
D)  Reperformance of recorded depreciation expense 
A)  Adequacy of controls over acquisitions of long-lived assets 
B)  Tracing disposals of long-lived assets to the Fixed Asset Master File 
C)  Determining the adequacy of the funds available for capital expenditures 
D)  Reperformance of recorded depreciation expense

Question 15

The auditor receives the client's schedule of recorded disposals and then performs detail tie-in tests of the recorded disposals schedule. What procedures does the auditor perform on the client's schedule of recorded disposals?

Accepted Answer

Footing the schedule
Tracing t

Question 16

Discuss the key internal controls related to the disposal of property, plant, and equipment.

Accepted Answer

The most important internal control over

Question 17

Typically, analytical procedures are the primary means of verifying income statement accounts resulting from allocations.

Accepted Answer

A) True 
 B)False

Question 18

The auditor should keep in mind that the amount in insurance expense is a residual amount.

Accepted Answer

A) True 
 B)False

Question 19

Discuss the key internal controls for prepaid insurance that affect the auditor's extent of testing of the prepaid insurance account.

Accepted Answer

Internal controls for prepaid insurance

Question 20

The auditor's starting point for verifying disposals of property, plant, and equipment is the:

Accepted Answer

A)  equipment account in the general ledger. 
B)  file of shipping documents. 
C)  client's schedule of recorded disposals. 
D)  equipment subsidiary ledger. 
A)  equipment account in the general ledger. 
B)  file of shipping documents. 
C)  client's schedule of recorded disposals. 
D)  equipment subsidiary ledger.

Exam 19: Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

To be capitalized as part of property, plant and equipment, assets must:

The least helpful common audit test to verify current period acquisitions of property, plant, and equipment is examining vendors' invoices and receiving reports.

Which of the following audit procedures would be least likely to lead the auditor to find an unrecorded fixed asset disposal?

One of the auditor's primary objectives when auditing manufacturing equipment is completeness.

Completeness and existence are the auditor's primary objectives in auditing manufacturing equipment.

Improperly classifying a fixed asset by recording the amount in the repairs and maintenance expense account will have an effect on which of the following financial statements until the asset would normally have been depreciated?

In connection with a review of the prepaid insurance account, which of the following audit procedures would you be least likely to use?

What are several analytical procedures used in the audit of prepaid insurance and insurance expense?

The failure to capitalize a permanent asset, or the recording of an asset acquisition at the improper amount, affects the balance sheet:

Which of the following is a customary audit procedure for the verification of the legal ownership of real property?

When auditing acquisitions of property, plant, and equipment, the auditor's review of lease and rental agreements most closely relate to the cutoff objective.

The primary accounting record for manufacturing equipment and other fixed assets is the:

The company's choices for fixed asset on the assets useful life and residual value impact the amount of depreciation recorded.

Which of the following would generally not be a component of the audit of the acquisition and payment cycle?

The auditor receives the client's schedule of recorded disposals and then performs detail tie-in tests of the recorded disposals schedule. What procedures does the auditor perform on the client's schedule of recorded disposals?

Discuss the key internal controls related to the disposal of property, plant, and equipment.

Typically, analytical procedures are the primary means of verifying income statement accounts resulting from allocations.

The auditor should keep in mind that the amount in insurance expense is a residual amount.

Discuss the key internal controls for prepaid insurance that affect the auditor's extent of testing of the prepaid insurance account.

The auditor's starting point for verifying disposals of property, plant, and equipment is the:

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

The CPA Profession

Audit Evidence

Audit Planning and Analytical Procedures

Materiality and Risk

Section 404 Audits of Internal Control and Control Risk

Fraud Auditing

The Impact of Information Technology on the Audit Process

Overall Audit Plan and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls and Substantive Tests of Transactions

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit Sampling for Tests of Details and Balances

Audit of the Acquisition and Payment Cycle: Tests of Controls and Substantive Tests of Transactions, and Accounts Payable

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash Balances

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

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