Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
10th Edition
ISBN: 9780077732509
Author: William F Messier Jr, Steven M. Glover Associate Professor, Douglas F. Prawitt Associate Professor
Publisher: McGraw-Hill Education
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Chapter 14, Problem 14.21MCQ
To determine
Concept Introduction:
Assets are the most valuable item for a company. The company applies controls over assets for its safeguard and detection of assets frauds. The auditor also tests these controls to determine the nature and extent of the
To choose: the correct option.
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What are the major differences between the audit of prepaid expensesand other asset accounts such as accounts receivable or property, plant, and equipment?
1) The auditors analyze repairs and maintenance expense to:
a)determine that plant & equipment accounts are not understated.
b)determine that all maintenance items are recorded.
c)determine that plant & equipment accounts are not overstated
d)determine that maintenance expense amounts are authorized.
2)In auditing valuation of property, plant and equipment when its value is impaired, the auditors should:
a)recalculate the depreciation expense on the item.
b)recompute the net book value of the item.
c)vouch the purchase of the item.
d)evaluate the valuation model used for the item.
3)Which of the following best describes why auditors audit leased assets in conjunction with the audit of property, plant & equipment?
a)Management may choose to lease assets rather than buy them.
b)Leased assets have a higher risk of misstatement.
c)Most leased assets should be capitalized.d)Repairs and maintenance expense is affected by leased assets.
4)Which of the following best…
Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets?
a. Examine property tax records.
b. Send confirmations to insurance agents.
c. Examine scrap sales accounts.
d. Make client inquiries.
Chapter 14 Solutions
Auditing & Assurance Services: A Systematic Approach (Irwin Accounting)
Ch. 14 - Prob. 14.1RQCh. 14 - Prob. 14.2RQCh. 14 - Prob. 14.3RQCh. 14 - Prob. 14.4RQCh. 14 - Prob. 14.5RQCh. 14 - Prob. 14.6RQCh. 14 - Prob. 14.7RQCh. 14 - Prob. 14.8RQCh. 14 - Prob. 14.9RQCh. 14 - Prob. 14.10RQ
Ch. 14 - Prob. 14.11RQCh. 14 - Prob. 14.12MCQCh. 14 - Prob. 14.13MCQCh. 14 - Prob. 14.14MCQCh. 14 - Prob. 14.15MCQCh. 14 - Prob. 14.16MCQCh. 14 - Prob. 14.17MCQCh. 14 - Prob. 14.18MCQCh. 14 - Prob. 14.19MCQCh. 14 - Prob. 14.20MCQCh. 14 - Prob. 14.21MCQCh. 14 - Prob. 14.22MCQCh. 14 - Prob. 14.23PCh. 14 - Prob. 14.24PCh. 14 - Prob. 14.25PCh. 14 - Prob. 14.26PCh. 14 - Prob. 14.27PCh. 14 - Prob. 14.28P
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- The auditing procedure that could least likely lead the auditor to find unrecorded property, plant, and equipment disposals isA. Vouching purchase invoices for asset additions.B. Review of voucher for the payment of property taxes.C. Review of miscellaneous income accountD. Review of loan agreement for fixed assets used as collateralE. None of themarrow_forwardWhich of the following best describes the independent auditor's approach to obtaining satisfaction concerning depreciation expense in the income statement? a.Review the mathematical accuracy of the amounts charged to income as a result of depreciation expens b.Determine the method of computing depreciation expense and ascertain that it is in accordance with generally accepted accounting principle c.Support the basis of depreciable assets and the depreciation expens d.Reconcile the amount of depreciation expense to those amounts credited to accumulated depreciation account e.Select a sample of equipment items in the manufacturing facility and vouch back to the recorded subsidiary ledge r.s.e.s.e.ry ledger.arrow_forwardAuditors should obtain evidence that there are no significant amounts of unrecorded retirements of property, plant and equipment. a. Describe three ways that the auditors obtain evidence that there are no significant amounts of unrecorded retirements of equipment.arrow_forward
- The auditor is MOST likely to learn of retirements of equipment through which of the following? a. Review of the purchase and allowance account. b. Review of the sales discount account. c. Analysis of the credits to the accumulated depreciation account. d. Review of insurance policy riders. e. Confirmation of recorded credits to the accounts payable account.arrow_forwardWhich documents would an auditor most likely choose to examine closely to ascertain that all expenditures incurred during the accounting period have been recorded as a liability?a. invoices b. purchase orders c. purchase requisitions d. receiving reportsarrow_forwardIn auditing depreciation expense, what major considerationsshould the auditor keep in mind? Explain how each can be verifiedarrow_forward
- The auditor assigned to audit the property, plant and equipment requested a schedule of property additions for the year as well as a schedule of repairs and maintenance expense, which of the following is incorrect? O The audit proposition that a capitalizable cost might have been erroneously charged as outright repairs and maintenance expense is necessary to audit the completeness assertion of PPE additions. O Tracing property additions to the physical asset is necessary to audit the existence assertion over PPE. O Items in the schedule of repairs and maintenance shall be vouched to the supporting documents to ascertain whether these are indeed to be recognized as outright expense. This is necessary to audit the occurrence assertion of the expense. Items in the schedule of property additions shall be traced back to the supporting documents to verify their propriety. This is necessary to audit the completeness assertion over PPE additions.arrow_forwardWhen auditing the existence assertion for an asset, auditors proceed from thea. Financial statement amounts back to the potentially unrecorded items.b. Potentially unrecorded items forward to the financial statement amounts.c. General ledger back to the supporting original transaction documents.d. Supporting original transaction documents to the general ledger.arrow_forward29. Which of the following best describes the independent auditors' approach to obtaining satisfaction concerning depreciation expense in the income statement? Group of answer choices Establish the basis for depreciable assets and verify the depreciation expense Reconcile the amount of depreciation expense to those amounts credited to accumulated depreciation accounts Determine the method for computing depreciation expense and ascertain that is in accordance with generally accepted accounting principles Verify the mathematical accuracy of the amounts charged to income as a result of depreciation expensearrow_forward
- The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal. This audit procedure primarily tests which of the following assertions for the equipment account? a. Presentation and disclosure. b. Rights. c. Valuation. d. Existence.arrow_forwardThe auditor should see to it that fully depreciated property, plant, and equipment still in use must be disclosed True or False?arrow_forwardDescribe the purpose and give examples of audit procedures in the search for unrecorded liabilities.arrow_forward
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