For each of the following misstatements in property, plant, andequipment accounts, state an internal control that the client can implement to preventthe misstatement from occurring and a substantive audit procedure that the auditor canuse to discover the misstatement:1. Computer equipment that is abandoned or traded for replacement equipment isnot removed from the accounting records.2. Depreciation expense for manufacturing operations is charged to administrativeexpenses.3. The asset lives used to depreciate equipment are less than reasonable, expected useful lives.4. Capitalizable assets are routinely expensed as repairs and maintenance, perishabletools, or supplies expense.5. Acquisitions of property are recorded at incorrect amounts.6. A loan against existing equipment is not recorded in the accounting records. Thecash receipts from the loan never reached the company because they were used forthe down payment on a piece of equipment now being used as an operating asset. Theequipment is also not recorded in the records.7. Tools necessary for the maintenance of equipment are stolen by company employeesfor their personal use
For each of the following misstatements in property, plant, and
equipment accounts, state an internal control that the client can implement to prevent
the misstatement from occurring and a substantive
use to discover the misstatement:
1. Computer equipment that is abandoned or traded for replacement equipment is
not removed from the accounting records.
2. Depreciation expense for manufacturing operations is charged to administrative
expenses.
3. The asset lives used to
4. Capitalizable assets are routinely expensed as repairs and maintenance, perishable
tools, or supplies expense.
5. Acquisitions of property are recorded at incorrect amounts.
6. A loan against existing equipment is not recorded in the accounting records. The
cash receipts from the loan never reached the company because they were used for
the down payment on a piece of equipment now being used as an operating asset. The
equipment is also not recorded in the records.
7. Tools necessary for the maintenance of equipment are stolen by company employees
for their personal use
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