Question 1

The auditor's main objectives in the verification of the sale,trade-in,or abandonment of equipment are to gather sufficient appropriate evidence that all disposals are ________ and at the ________.

Accepted Answer

A)  verified, historical cost 
B)  recorded, correct amounts 
C)  accurate, proper gain or loss amount 
D)  classified properly, net realizable value

Question 2

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 3

The auditor needs to be aware that most users of financial statements rely most heavily on the ________ for making decisions.

Accepted Answer

A)  balance sheet 
B)  income statement 
C)  statement of cash flows 
D)  statement of stockholders' equity

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

The audit of insurance expense is normally limited to analytical procedures and a brief test of whether charges to insurance expense arose from credits to prepaid insurance.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an analytical procedure to determine if there is idle equipment or equipment that was disposed of but not written off?

Accepted Answer

A)  Compare depreciation expense divided by gross equipment cost with previous years. 
B)  Compare gross manufacturing cost divided by some measure of production with previous years. 
C)  Compare accumulated depreciation divided by gross equipment cost with previous years. 
D)  Compare annual repairs and maintenance accounts with previous years.

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

Describe the two tests auditors can perform to test for the existence and omissions of insurance policies in force.

Accepted Answer

The answer of Describe the two tests auditors can perform...

Question 11

The primary characteristic that distinguishes property,plant,and equipment from inventory,prepaid expenses,and investments is the intention to use property,plant,and equipment as a part of the operations of the client's business over their expected life.

Accepted Answer

A) True 
 B)False

Question 12

The emphasis in auditing manufacturing equipment is on the verification of current-period disposals and acquisitions.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following expenses is not typically evaluated as part of the audit of the acquisition and payment cycle?

Accepted Answer

A)  Depreciation expense 
B)  Insurance expense 
C)  Estimated liability for warranties 
D)  Property tax expense

Question 14

Insurance expense for the period is a function of which of the following?

Accepted Answer

A)  The beginning prepaid balance, current premium payments and the ending prepaid balance 
B)  The beginning prepaid balance and the current period premium payments 
C)  The current period premium payments 
D)  The current period premium payments and the ending prepaid balance

Question 15

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

Accepted Answer

A)  accrued liability balances are less material than accounts payable balances. 
B)  accrued liabilities at year end will become accounts payable during the following year. 
C)  evidence supporting accrued liabilities is non-existent, whereas evidence supporting accounts payable is readily available. 
D)  accrued liabilities usually pertain to services of a continuing nature, whereas accounts payable are the result of completed transactions.

Question 16

Explain the audit objective allocation and why it is important to have accurate allocation within the financial statements,particularly for property,plant,and equipment

Accepted Answer

The answer of Explain the audit objective allocation and why...

Question 17

Tests of controls provide an indication of the likelihood of misstatements in both the income statement and the balance sheet,simultaneously.

Accepted Answer

A) True 
 B)False

Question 18

The source of debits in the equipment account is the:

Accepted Answer

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

Question 19

When auditing disposals of property,plant,and equipment,the search for unrecorded disposals is essential.State the four audit procedures frequently used for verifying disposals.

Accepted Answer

The answer of When auditing disposals of property,plant,and equipment,the search...

Question 20

In determining the reasonableness of the client's amount for depreciation expense the auditor is primarily concerned that the client has followed a consistent policy and the calculations are correct.Which of the following audit objectives best addresses the above concerns?

Accepted Answer

A)  Existence 
B)  Accuracy 
C)  Valuation 
D)  Allocation

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

The auditor's main objectives in the verification of the sale,trade-in,or abandonment of equipment are to gather sufficient appropriate evidence that all disposals are and at the .

The most common audit test to verify equipment additions is to:

The auditor needs to be aware that most users of financial statements rely most heavily on the ________ for making decisions.

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

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

When auditing accrued property taxes:

The audit of insurance expense is normally limited to analytical procedures and a brief test of whether charges to insurance expense arose from credits to prepaid insurance.

Which of the following is an analytical procedure to determine if there is idle equipment or equipment that was disposed of but not written off?

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.

Describe the two tests auditors can perform to test for the existence and omissions of insurance policies in force.

The primary characteristic that distinguishes property,plant,and equipment from inventory,prepaid expenses,and investments is the intention to use property,plant,and equipment as a part of the operations of the client's business over their expected life.

The emphasis in auditing manufacturing equipment is on the verification of current-period disposals and acquisitions.

Which of the following expenses is not typically evaluated as part of the audit of the acquisition and payment cycle?

Insurance expense for the period is a function of which of the following?

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

Explain the audit objective allocation and why it is important to have accurate allocation within the financial statements,particularly for property,plant,and equipment

Tests of controls provide an indication of the likelihood of misstatements in both the income statement and the balance sheet,simultaneously.

The source of debits in the equipment account is the:

When auditing disposals of property,plant,and equipment,the search for unrecorded disposals is essential.State the four audit procedures frequently used for verifying disposals.

In determining the reasonableness of the client's amount for depreciation expense the auditor is primarily concerned that the client has followed a consistent policy and the calculations are correct.Which of the following audit objectives best addresses the above concerns?