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

The starting point for the verification of current-year acquisitions of property, plant, and equipment is normally a client-prepared schedule of all acquisitions recorded in the general ledger during the year.

Which of the following would indicate a deficiency in internal controls in the acquisition and payment cycle?

The erroneous inclusion of transactions that should properly be recorded as assets into accounts such as repairs expense, lease expense, or supplies is a common client error. The auditor is most lkely to evaluate the likelihood of these types of misclassifications in conjunction with:

Normally it may be unnecessary to examine supporting documentation for each addition to property, plant, and equipment, but it would be customary to verify:

Confirmations are commonly used to verify additions of property, plant, and equipment.

While analytical procedures are commonly used when auditing balance sheet accounts, they are normally not very useful when auditing income statement accounts.

Failure to capitalize a fixed asset at the correct amount would impact which financial statements until the company disposes of the asset?

Controls over the acquisition and recording of insurance are a part of which of the following transaction cycles?

Which type of audit procedure would normally be sufficient for purposes of auditing prepaid expenses and deferred charges?

The primary accounting record for property, plant, and equipment accounts is the fixed asset master file. What is included for each fixed asset in the master file?

The approach to auditing patents and copyrights is similar to that used for property, plant, and equipment accounts.

The audit procedures used to verify accrued liabilities differ from those employed for the verification of accounts payable because:

A set of records for each piece of equipment that includes descriptive information, date of acquisition, original cost, current year depreciation, and accumulated depreciation is the:

When the auditor recomputes the unexpired portion of prepaid insurance, she is satisfying which audit objective?

The test of details of balances procedure to "examine vendors' invoices of closely related accounts such as repairs to uncover items that should be property, plant, and equipment" satisfies the audit objective of:

The audit procedure "foot the schedule of fixed assets acquisitions and trace the total to the general ledger" relates most closely to the completeness objective for fixed assets acquisitions.

To achieve effective internal accounting control over fixed asset additions, a company should establish procedures that require:

State four of the seven specific balance-related audit objectives for property, plant, and equipment additions and, for each objective, describe one common test of details of balances.

When the auditor is determining appropriate depreciation calculations for the classifications in the client's fixed asset master file she is testing the audit objective of:

The auditor needs to gain reasonable assurance that the equipment accounts in the fixed asset master file are not understated. Which of the following accounts would most likely be reviewed in making that determination?