Question 1

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...

Question 2

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 3

In the audit of accrued property taxes, the two most important balance-related audit objectives are completeness and accuracy.

Accepted Answer

A) True 
 B)False

Question 4

In auditing depreciation expense one the auditors concerns is on determining that the client's calculations are correct. In determining that the auditor must weigh which four considerations?

Accepted Answer

The answer of In auditing depreciation expense one the auditors...

Question 5

The test of details of balances procedure which requires a "recalculation of investment credit" satisfies the audit objective of:

Accepted Answer

A)  classification. 
B)  detail tie-in. 
C)  existence. 
D)  accuracy.

Question 6

Tests of the cutoff objective for prepaid insurance is normally not performed by auditors.

Accepted Answer

A) True 
 B)False

Question 7

The balance in the property tax expense account is most similar to:

Accepted Answer

A)  depreciation expense. 
B)  insurance expense. 
C)  compensation expense. 
D)  utilities expense.

Question 8

Ordinarily, if you are auditing a continuing client, it is unnecessary to test the accuracy objective or the classification objective for fixed assets acquired in prior years.

Accepted Answer

A) True 
 B)False

Question 9

Methods used to determine if there are legal encumbrances related to fixed assets include all but which of the following?

Accepted Answer

A)  Reading terms of loan and credit agreements 
B)  Reviewing loan confirmations received from banks 
C)  Having discussions with the client or sending letters to legal counsel 
D)  All of the above may be used to identify legal encumbrances

Question 10

The auditor normally does not need to test the accuracy or classification of fixed assets recorded in prior periods if they are the continuing auditor because:

Accepted Answer

A)  they are rarely material to the audit. 
B)  they rarely contain misstatements. 
C)  they are verified in previous audits. 
D)  they don't affect the balance sheet.

Question 11

You are auditing Manufacturing Company and testing the audit related objective of completeness for the equipment accounts. Which of the following audit procedures is most likely to achieve your objective?

Accepted Answer

A)  Examine vendor invoices and receiving reports 
B)  Physically examine assets 
C)  Examine vendor invoices of closely related accounts such as repairs and maintenance 
D)  Trace individual acquisitions to the fixed asset master file

Question 12

Which of the following audit tests both have the effect of simultaneously verifying balance sheet and income statement accounts?

Accepted Answer

A)  Analytical procedures and substantive tests of transactions 
B)  Tests of controls and substantive tests of transactions 
C)  Tests of details of balances and substantive tests of transactions 
D)  Tests of controls and analytical procedures

Question 13

The auditor's tests for proper cutoff of current year acquisitions of property, plant, and equipment are usually done as part of accounts payable cutoff tests.

Accepted Answer

A) True 
 B)False

Question 14

When auditors verify accrued property taxes two audit objectives are especially significant. These are:

Accepted Answer

A)  completeness and accuracy. 
B)  completeness and net realizable value. 
C)  detail tie-in and completeness. 
D)  accuracy and classification.

Question 15

Which balance-related audit objective is not relevant to an audit of prepaid expenses?

Accepted Answer

A)  Rights 
B)  Accuracy 
C)  Detail tie-in 
D)  Realizable value

Question 16

Explain the allocation audit objective and explain why it is important to have accurate allocation within the financial statements, in relationship to Property, Plant, and Equipment

Accepted Answer

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

Question 17

Inadequate controls and misstatements discovered through tests of controls and substantive tests of transactions are an indication of the likelihood of misstatements in:

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 18

Which of the following tests are typically not necessary when auditing a client's schedule of recorded disposals?

Accepted Answer

A)  Footing the schedule. 
B)  Tracing schedule totals to the general ledger. 
C)  Tracing cost and accumulated depreciation of the disposals to the property master file. 
D)  All of the above are necessary.

Question 19

Which of the following accounts is not associated with the acquisition and payment cycle?

Accepted Answer

A)  Common stock 
B)  Property, plant and equipment 
C)  Accrued property taxes 
D)  Income tax expense

Question 20

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.

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

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.

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

In the audit of accrued property taxes, the two most important balance-related audit objectives are completeness and accuracy.

In auditing depreciation expense one the auditors concerns is on determining that the client's calculations are correct. In determining that the auditor must weigh which four considerations?

The test of details of balances procedure which requires a "recalculation of investment credit" satisfies the audit objective of:

Tests of the cutoff objective for prepaid insurance is normally not performed by auditors.

The balance in the property tax expense account is most similar to:

Ordinarily, if you are auditing a continuing client, it is unnecessary to test the accuracy objective or the classification objective for fixed assets acquired in prior years.

Methods used to determine if there are legal encumbrances related to fixed assets include all but which of the following?

The auditor normally does not need to test the accuracy or classification of fixed assets recorded in prior periods if they are the continuing auditor because:

You are auditing Manufacturing Company and testing the audit related objective of completeness for the equipment accounts. Which of the following audit procedures is most likely to achieve your objective?

Which of the following audit tests both have the effect of simultaneously verifying balance sheet and income statement accounts?

The auditor's tests for proper cutoff of current year acquisitions of property, plant, and equipment are usually done as part of accounts payable cutoff tests.

When auditors verify accrued property taxes two audit objectives are especially significant. These are:

Which balance-related audit objective is not relevant to an audit of prepaid expenses?

Explain the allocation audit objective and explain why it is important to have accurate allocation within the financial statements, in relationship to Property, Plant, and Equipment

Inadequate controls and misstatements discovered through tests of controls and substantive tests of transactions are an indication of the likelihood of misstatements in:

Which of the following tests are typically not necessary when auditing a client's schedule of recorded disposals?

Which of the following accounts is not associated with the acquisition and payment cycle?

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