Marissa is an audit intern working at Marshall CPA firm. Her supervisor at Marshall CPA firm has explained that the audit of property, plant and equipment and the related accounts ties in to management's expectations of the firm's earnings. Marissa is unclear as to how this relationship works and asks the supervisor to elaborate. Which of the following would be the most accurate response? O The relationship is fairly straightforward. If the client's management is keen to show strong earnings to beat analysts' expectations, they may manipulate depreciation expenses to boost these earnings. O The best way to think about this relationship is to think about how fixed assets are depreciated over time, and the incentive management has to shorten useful lives to decrease depreciation expenses. O The relationship works on the premise that when property, plant and equipment is amortized, the firms earnings are boosted through the accelerated amortization of fixed assets. O None of these answer choices are correct.

Marissa is an audit intern working at Marshall CPA firm. Her supervisor at Marshall CPA firm has explained that the audit of property, plant and equipment and the related accounts ties in to management's expectations of the firm's earnings. Marissa is unclear as to how this relationship works and asks the supervisor to elaborate. Which of the following would be the most accurate response? O The relationship is fairly straightforward. If the client's management is keen to show strong earnings to beat analysts' expectations, they may manipulate depreciation expenses to boost these earnings. O The best way to think about this relationship is to think about how fixed assets are depreciated over time, and the incentive management has to shorten useful lives to decrease depreciation expenses. O The relationship works on the premise that when property, plant and equipment is amortized, the firms earnings are boosted through the accelerated amortization of fixed assets. O None of these answer choices are correct.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: You are an induction and training officer for Maher Public Accountants, a leading accounting firm…

A: Audit is an official examination of financial information of an entity. The person who conducts the…

Q: Briefly explain the definition of Audit Evidence.

A: The quality of an audit is determined by audit evidence. If audit evidence is complete and reliable…

Q: Adrianna has been hired as an accounting coordinator at a new dermatology office. During a meeting…

A: Internal control procedures refer to the policies, practices, and processes put in place by an…

Q: Ryan Clark was reviewing the previous year's audited financial statements of a clothing…

A: His manager was describing assurance engagement where the user of the financial statements receives…

Q: Saleha was recently hired by the accounting firm of Haron & Associates. After two weeks of joining…

A: The quality of an audit is determined by audit evidence. If audit evidence is complete and reliable…

Q: does this request?

A: An auditor is a person appointed to check the accuracy and authenticity of the books of account or…

Q: During the audit of Seahorse LLC, the external auditors, Packhorse CPAs, have just completed their…

A: The correct response is:c. Upon completion of the audit of internal controls, the auditing firm…

Q: You are the auditor in charge of the audit of Evermore Foods, a small, owner-managed distribution…

A: Situation A:When auditing Evermore Foods, you have to consider how their new bonus plan for sales…

Q: John and Kayla, two audit staff associates are discussing potential telltale signs to watch out for…

A: Understanding and managing fraud risk is an ongoing process that requires vigilance and…

Q: Is it an entity inherent risk for the information below? Supervisors working at Marco Inc.…

A: The possibility that an auditor may provide an unqualified opinion on financial accounts that are…

Q: John Josephs an audit manager for Tip, Acanoe & Tylerto, was asked to speak at a dinner meeting of…

A: Answer:- A. Client Acceptance Pre Planning Establish materiality and assess risk Plan the audit…

Q: Ja'Niya, a recent college graduate has started working for Cline CPA Firm. Ja'Niya is currently…

A: The correct answer is:d. The auditor may use the management letter to note areas of deficiency in…

Q: Company. The partner responsible for the audit has recently spent a week working with XYZ as a paid…

A: Independence of an auditor refers to the fact that the auditor is free to carry out the work on its…

Question

Marissa is an audit intern working at Marshall CPA firm. Her supervisor at Marshall CPA firm has explained that the audit of property,
plant and equipment and the related accounts ties in to management's expectations of the firm's earnings. Marissa is unclear as to how
this relationship works and asks the supervisor to elaborate. Which of the following would be the most accurate response?
O The relationship is fairly straightforward. If the client's management is keen to show strong earnings to beat analysts'
expectations, they may manipulate depreciation expenses to boost these earnings.
O The best way to think about this relationship is to think about how fixed assets are depreciated over time, and the incentive
management has to shorten useful lives to decrease depreciation expenses.
The relationship works on the premise that when property, plant and equipment is amortized, the firms earnings are
boosted through the accelerated amortization of fixed assets.
O None of these answer choices are correct.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Hi, I have an assignment and I was asked to the audit Assume you are the senior accountant on an audit engagement of a fictitious business, Pine Street Company (PSC). Assume the instructor is the engagement partner. You are to prepare a audit program for PSC. The firm manufactures and sells bicycles. The audit program must be in one of the following areas of the business: accounts receivable and revenues; inventories and costs of goods sold; accounts payable; payroll; or property, plant and equipment. Week 2 - Identify the components/sections of a cash audit program for PSC. Date General Journal Debit Credit Merchandise Inventory : $5,900 Account Payable Johns $5,900 Merchandise Inventory $330 Cash $330 Account Payable Johns $900 Merchandise Inventory $900 Account Payable Johns $5,000 Cash $4,900 Merchandise Inventory $100 Merchandise Inventory $ 12,250 Account Payable Johns $12,250 Account Payable Johns $3,250 Merchandise Inventory $3,250 Account…
Erica Gray, CPA, is a sole practitioner. She has been practicing as an auditor for 10 years. Recently a long-standing audit client asked Gray to design and implement an integrated computer-based accounting information system. The fees associated with this additional engagement with the client are very attractive. However, Gray wonders if she can remain objective on subsequent audits in her evaluation of the client’s accounting system and its records if she was responsible for its design and implementation. Gray knows that professional auditing standards require her to remain independent in fact and appearance from her auditing clients. Required 1. What do you believe auditing standards are mainly concerned with when they require independence in fact? In appearance? 2. Why is it important that auditors remain independent of their clients? 3. Do you think Gray can accept this engagement and remain independent? Justify your response.
Steve Ankenbrandt, president of Beeb Corporation, has been discussing the company’s internal operations with the presidents of several other multidivision companies. Ankenbrandt discovered that most of them have an internal audit staff. The activities of the staffs at other companies include financial audits, operational audits, and sometimes compliance audits. Required: Describe the meaning of the following terms as they relate to the internal auditing function: a. Financial auditing. b. Operational auditing. c. Compliance auditing.
Jimmy Bunting, the practitioner at Yanzhou Coal Mining and Minerals, performed the following tasks: he used analytical procedures and he had discussions with management. These activities were a basis for a conclusion on the financial information. What did Jimmy Bunting perform? a qualified report an unmodified opinion a review engagement O a compilation engagement
Ryan is an audit manager in a reputed tax and audit firm. He is incharge of the firm's engagement's objectives, scope, action plans and audit recommendations. He has to release the final audit results for the financialyear along with the internal auditor's options/ results. Which approach will best help him to furnish the details? A) Using external source and process reports B) Using assignment and feedback charts C) Using visualization and interactive reports D) Using accounts payable and receivable reports
You are a CPA and you are the CFO (Chief Financial Officer) of USB Computer Technologies Inc., a company that specializes in customized business software. You have been requested by the board of directors of the company to attend its meeting. During the meeting, one of the directors asked you, "Why audits of our company performed by different auditors (internal, external, government). Before you could answer question, another direfctor mentioned "it would be more cost-efficient if our internal auditors will performed all the audits. " Requirements. Write down your reply to each question of the members of the board of directors. In relation to your answer in number 1, identify the issues that must be explained to the Board.