6. Which of the. following techniques overstate long-lived assets? a. Overvalue existing assets. b. Include fictitious assets on the financial statements. c. Capitalize transactions that should be expensed. d. All of the above. can be used by management to:
6. Which of the. following techniques overstate long-lived assets? a. Overvalue existing assets. b. Include fictitious assets on the financial statements. c. Capitalize transactions that should be expensed. d. All of the above. can be used by management to:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:the heightened risk of material misstatement.
6. Which of the. following techniques
overstate long-lived assets?
a. Overvalue existing assets.
b. Include fictitious assets on the financial statements.
c. Capitalize transactions that should be expensed.
d. All of the above.
can be used by management to
7. Which of the following analyses might an auditor perform as part of
preliminary analytical procedures?
a. Develop an overall estimate of depreciation expense.
b. Compare capital expenditùres with the client's capital budget.
c. Perform a trend analysis of the ratio of depreciation expense to total
depreciable long-lived tangible assets.
d. All of the above could be performed as part of preliminary analytical
procedures.
8. Assume that the auditor decides to only, perform substantive tests of
details when auditing the equipment account. Which of the following
statements best describes the circumstancės associated with the client
being audited?
The client does not have effective controls over equipment.
b. The equipment account involves only a few assets of relatively high
а.
value.
c. Either a or b could be descriptive of the.circumstances associated
with the client being audited.
d. Neither a nor b would be descriptive of the circumstances associated
with the client being audited.
9. Assume that a client's controls over recording retirements of long-lived
tangible assets are not well designed. Which of the following procedures
would the auditor plan to perform as a way of responding to the
heightened risk of material misstatement?
a. Select long-lived tangible assets recorded in the property ledger and
locate them for inspection.
b. Inspect long-lived tangible assets located at the client location and
trace those assets to the property ledger.
c. Review the tangible long-lived asset. property ledger to see if
depreciation was recorded on each tangible long-lived asset.
d. The auditor would perform all of the above procedures to respond to
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