9. Assume that a client's controls over recording retirements of long-livedtangible assets are not well designed. Which of the following procedures-would the auditor plan to perform as a way of responding to theheightened risk of material misstatement?a. Select long-lived tangibie assets recorded in the property ledger andlocate them for inspection.b. Inspect long-lived tangible assets located at the client location andtrace those assets to the property ledger.c. Review the tangible long-lived asset, property ledger to see ifdepreciation was recorded on cach tangible long-lived asset.d. The auditor would perform all of the above procedures to respond tothe heightened risk of material misstatement.

Auditing is the detailed process of checking and verifying books of accounts and assets of the…

Answered: the heightened risk of material…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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13. As part of auditing equipment, the auditor will inspect new equipment additions selected from the client's property ledger. Thẻ procedure will provide evidence about which of the following assertions? a. Completeness b. Existence c. Valuation d. Rights and oblígations.
2. XYZ is conducting an audit of the property, plant, and equipment records of AQA Corporation. XYZ selected two specific assets for closer inspection. XYZ has examined documentation related to each asset's original purchase and compared it to the recorded cost, physically inspected the item to determine that it is still in the possession of the company and conducted other similar assurance procedures. The final step in the audit of these accounts is to test the calculations of depreciation expense and accumulated depreciation. XYZ has asked you to perform this final procedure for 2018. Below is a schedule of the two assets, with the depreciation values determined by AQA. The building was depreciated by the straight-line method, and the truck by the double-declining balance method. Determine if the indicated depreciation values are correct. Item Cost Purchase Service Salvage Value Depreciation Expense for Accumulated Date Life Depreciation at 2018 12/31/18 Building RO 1,200,000 July 1,…
16. In performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions? Group of answer choices Are depreciation policies in accordance with applicable financial reporting framework? Are disposals of property, plant and equipment properly authorized, removed from records including depreciation, and recorded in correct accounting period? Are all property, plant and equipment purchases, including finance leases, properly authorized, recorded in accordance with the capitalization threshold (e.g., P10,000) and in correct accounting period? All of the choices.
In a client currently using straight-line method for all depreciable assets acquires a new class of depreciable assets to initiate a new product line and begins to depreciate these assets on an accelerated basis, the auditor should A. Add a separate explanatory paragraph to the reportB. Express an adverse opinionC. Express the opinion subject to the effect of new depreciation methodD. Express thee opinion with no modification for the accounting change
explain. If, after obtaining an initial understanding of a client's internal control, the auditor wishes to further reduce the assessed level of control risk relating to plant asset transactions, the auditor should next Make extensive substantive tests of plant asset balances. Establish the physical existence of current year additions. Complete the plant asset section of the internal accounting control questionnaire. Further test those internal control procedures relating to processing and recording plant asset transactions.
Assume that the client’s internal controls over the recording and classifying of fixed asset additions are considered weak because the individual responsible for recording new acquisitions has inadequate technical training and limited experience in accounting. How will this situation affect the evidence you should accumulate in auditing fixed assets as compared with another audit in which the controls are excellent? Be as specific as possible.
Identify important internal control activitiespresent in a properly designed system tomitigate the risk of material misstatementsfor each relevant assertion in the revenueand collection cycle.
2. An audit firm is required to perform a risk assessment in order to determine whether to accept the new client or continue with repeat clients annually. Question 2 options: a) True b) False
How do you assess the risk of material misstatement associated with the audit of inventories?
Audit firms may have a standardized audit programs for auditing long-lived assets but auditors must still customize the audit program based on the assement of the risk of material misstatement. Why/how?

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