Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 6, Problem 15RQ
To determine
Identify the transaction-related audit objectives that has been violated.
To determine
Identify the transaction-related audit objectives that has been violated, if rather than expensing the acquisition, it had been capitalized as a fixed asset.
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Which of the following best describes why auditors audit leased assets in conjunction with the audit of property, plant & equipment?
Multiple Choice (B & D are incorrect)
A. Most leased assets should be capitalized.
B. Repairs and maintenance expense is affected by leased assets.
C. Management may choose to lease assets rather than buy them.
D. Leased assets have a higher risk of misstatement.
Assume that the client’s internal controls over the recordingand classifying of fixed asset additions are considered deficient because the individualresponsible for recording new acquisitions has inadequate technical training and limitedexperience 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 areexcellent? Be as specific as possible.
Chapter 6 Solutions
Auditing And Assurance Services
Ch. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - What are the six elements of professional...Ch. 6 - What are the five elements of an effective...Ch. 6 - Describe two of the more common judgment traps and...
Ch. 6 - Identify the cycle to which each of the following...Ch. 6 - Why are sales, sales returns and allowances, bad...Ch. 6 - Prob. 13RQCh. 6 - Prob. 14RQCh. 6 - Prob. 15RQCh. 6 - Prob. 16RQCh. 6 - Prob. 17RQCh. 6 - Prob. 18RQCh. 6 - Prob. 19RQCh. 6 - Prob. 20RQCh. 6 - Prob. 21.1MCQCh. 6 - Prob. 21.2MCQCh. 6 - Prob. 21.3MCQCh. 6 - Prob. 22.1MCQCh. 6 - Prob. 22.2MCQCh. 6 - Prob. 22.3MCQCh. 6 - Prob. 23.1MCQCh. 6 - Prob. 23.2MCQCh. 6 - Prob. 23.3MCQCh. 6 - Prob. 24.1MCQCh. 6 - Prob. 24.2MCQCh. 6 - Prob. 24.3MCQCh. 6 - Prob. 25DQPCh. 6 - Prob. 26DQPCh. 6 - Prob. 27DQPCh. 6 - Prob. 28DQPCh. 6 - Prob. 29DQPCh. 6 - Prob. 30DQPCh. 6 - Prob. 31DQPCh. 6 - Prob. 32DQPCh. 6 - Prob. 33DQPCh. 6 - Prob. 34DQP
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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
- Which one of the following fraudulent activities constitute misappropriation of assets? Omitting, advancing or delaying recognition of events and transactions Engaging in complex transactions that misrepresent the financial position of the entity. Causing an entity to pay for goods and services not received Concealing, or not disclosing, facts that could affect the recorded amounts. ENarrow_forwardAssume 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.arrow_forwardWhich 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.arrow_forward
- 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 changearrow_forwardThe 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_forwardIn evaluating the fair value of net assets in an acquisition the auditor has to gather independent evidence in deciding whether the assessed values are appropriate. Which of the following is not one of the steps the auditor normally would perform in making that assessment? Evaluate the qualifications of the specialist. O Determine their independence from the client. Make the valuations themselves. O Review methodology.arrow_forward
- In testing the existence assertion for an asset, an auditor ordinarily works from the a. Potentially unrecorded items to the financial statements. O b. Financial statements to the potentially unrecorded items. O c. Supporting evidence to the accounting records. O d. Accounting records to the supporting evidence.arrow_forwardIn substantive procedures, why is the emphasis on the completeness assertion for liabilities instead of on the existence assertion as in the audit of assets?arrow_forwardThe auditor should see to it that fully depreciated property, plant, and equipment still in use must be disclosed True or False?arrow_forward
- What procedures can auditors perform to detect fraudulent entries made during the consolidation process?arrow_forwardthe 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…arrow_forward9. 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 tangibie 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 cach tangible long-lived asset. d. The auditor would perform all of the above procedures to respond to the heightened risk of material misstatement.arrow_forward
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