1. Of the following assertions, which is generally considered a particularly high risk for self-constructed fixed assets? a. Completeness b. Presentation c. Ownership (rights) d. Valuation
1. Of the following assertions, which is generally considered a particularly high risk for self-constructed fixed assets?
a. Completeness
b. Presentation
c. Ownership (rights)
d. Valuation
2. Which of the following types of fixed assets is considered to have higher inherent risk?
a. Leased fixed assets
b. Purchased equipment
c. Vehicles
d. Purchased buildings
3. Which of the following is the usual
a. Vouching a sample of additions to fixed assets made during the fiscal year being audited, to supporting vendor invoices.
b. Vouching a sample of deletions of fixed assets made during the fiscal year being audited and prior years, to supporting vendor invoices.
c. Tracing a sample of vendor invoices to debits to fixed assets during the fiscal year being audited.
d. Substantive analytical procedures
4. An auditor has been assigned to audit the existence assertion for fixed assets. The auditor (a Mercer graduate) should
a. Select a sample of disposals (credits) as shown on the fixed assets register and vouch to vendor invoices.
b. Confirm the physical existence of major additions.
c. Confirm the physical existence of a monetary unit sample selected from the population of the book value of all fixed assets.
d. Confirm the physical existence of a random sample selected from the population of all fixed assets.
5. For which specific type of fixed asset is the ownership (rights) assertion particularly important to audit?
a Equipment
b Land
c Self-constructed fixed assets
d Furniture
6. What is the threshold for work paper documentation? Answer in one sentence
7. Precisely state in one sentence or phrase, the most important control over fixed assets, such as laptop computers, that are warehoused.
8. Which of the following does the text book suggest may need to be tested, but the instructor believes does not need to be tested in an audit of the financial statements?
a Existence
b Authorization
c Ownership
d None of the above
9. Generally, the highest risk assertion for intangible assets is
a Existence
b Valuation
c Completeness
d None of the above
EXTRA CREDIT (worth 2 pts each)
10. What is the effect when a foreign competitor's currency becomes weaker compared with the US dollar?
a. The foreign company will have an advantage in the US market
b. The foreign company will be disadvantaged in the US market
The fluctuation in the foreign currency's exchange rate will have no effect on the US company's sales or cost of goods sold
d. it is better for the US company when the value of the US dollar strengthens
11. If the
a. Present value of
b.
c. Present value index would be less than 100
d. Rate of return for this project is greater than the discount percentage rate used in the net present value computation.
12. An increase in which of the following should lead a company to reduce the average inventory it maintains?
a. The cost of placing an order
b. The cost of carrying inventory
c. The annual demand for the product
d. The lead time needed to acquire inventory
13. In equipment replacement decisions, which one of the following is not relevant?
a. Current market value disposal price of the old equipment
b. Original fair market value of the equipment
c. Cost of the new equipment
d. Operating costs of the new equipment
See next page for additional questions
14. If a product requires a great deal of electricity to produce and crude oil prices have increased, which of the following costs most likely increased?
a. Direct materials
b. Direct labor
c. Indirect labor
d. Indirect materials
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