Question 1

Cutoff for acquisitions of insurance is normally not a significant problem for the auditors.

Accepted Answer

A) True 
 B)False

Question 2

Auditors needs to examine purchase and/or lease contracts entered into related to property, plant, and equipment, to determine if capitalization of the property, plant, and equipment is appropriate or not.

Accepted Answer

A) True 
 B)False

Question 3

Depreciation amounts are determined by exchange transactions with outside parties.

Accepted Answer

A) True 
 B)False

Question 4

Depreciation expense is normally verified as a part of tests of details of balances rather than as part of tests of controls or substantive tests of transactions.

Accepted Answer

A) True 
 B)False

Question 5

The most important audit objective for depreciation expense is detail tie-in.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The most common audit test to verify equipment additions is to

Accepted Answer

A)  examine vendors' invoices. 
B)  perform an inventory of the fixed assets. 
C)  confirm the additions with the vendors. 
D)  trace the vendor invoices to the cash disbursements journal.

Question 9

When the auditor is determining whether the client followed a consistent depreciation policy from period to period, and the client's depreciation calculations are correct, the balance-related audit objective of ________ is being determined for depreciation expense.

Accepted Answer

A)  completeness 
B)  existence 
C)  classification 
D)  accuracy

Question 10

The types of assets, expenses, and liabilities associated with the acquisition and payment cycle will differ by company.

Accepted Answer

A) True 
 B)False

Question 11

The source of debits in the equipment account is the

Accepted Answer

A)  sales schedule. 
B)  cash disbursements journal. 
C)  cash receipts journal. 
D)  acquisitions schedule.

Question 12

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

Question 13

When auditing accrued property taxes,

Accepted Answer

A)  the auditors will generally only verify the larger payments since there are usually many property tax payments. 
B)  property taxes should only be charged to one expense account. 
C)  the auditor begins by obtaining a schedule of property tax payments from the client. 
D)  the auditor must generally spend a considerable amount of time in this area.

Question 14

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

Accepted Answer

The answer of Discuss the key internal controls related to...

Question 15

In the audit of equipment and related accounts, verifying that the ending balances are properly classified and are adequately disclosed in the financial statements is one of the tests the auditor must perform.

Accepted Answer

A) True 
 B)False

Question 16

When an auditor recomputes the unexpired portion of prepaid insurance, they are satisfying which audit objective?

Accepted Answer

A)  completeness 
B)  existence 
C)  accuracy and detail tie-in 
D)  rights

Question 17

In the analysis of expense accounts, the auditor verifies transactions in specific accounts to determine whether the transactions are properly classified and accurately recorded.

Accepted Answer

A) True 
 B)False

Question 18

You are auditing the acquisition and payment cycle and note the presence of excessive recurring losses on retired assets. You may conclude that

Accepted Answer

A)  insured values are greater than book values. 
B)  there are a large number of fully depreciated assets. 
C)  depreciation charges may by insufficient. 
D)  the company has a policy of selling relatively new assets.

Question 19

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

Accepted Answer

A)  acquisitions schedule. 
B)  depreciation schedule. 
C)  fixed asset master file. 
D)  file of purchase requisitions.

Question 20

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

Accepted Answer

A) True 
 B)False

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

Cutoff for acquisitions of insurance is normally not a significant problem for the auditors.

Auditors needs to examine purchase and/or lease contracts entered into related to property, plant, and equipment, to determine if capitalization of the property, plant, and equipment is appropriate or not.

Depreciation amounts are determined by exchange transactions with outside parties.

Depreciation expense is normally verified as a part of tests of details of balances rather than as part of tests of controls or substantive tests of transactions.

The most important audit objective for depreciation expense is detail tie-in.

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

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

The most common audit test to verify equipment additions is to

When the auditor is determining whether the client followed a consistent depreciation policy from period to period, and the client's depreciation calculations are correct, the balance-related audit objective of ________ is being determined for depreciation expense.

The types of assets, expenses, and liabilities associated with the acquisition and payment cycle will differ by company.

The source of debits in the equipment account is the

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?

When auditing accrued property taxes,

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

In the audit of equipment and related accounts, verifying that the ending balances are properly classified and are adequately disclosed in the financial statements is one of the tests the auditor must perform.

When an auditor recomputes the unexpired portion of prepaid insurance, they are satisfying which audit objective?

In the analysis of expense accounts, the auditor verifies transactions in specific accounts to determine whether the transactions are properly classified and accurately recorded.

You are auditing the acquisition and payment cycle and note the presence of excessive recurring losses on retired assets. You may conclude that

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

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