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1 | |
Property, plant, and equipment transactions include all of the following except: |
| | A) | Leasing capital assets. |
| | B) | Acquiring capital assets in exchange for stock. |
| | C) | Recording goodwill at the time a subsidiary is purchased. |
| | D) | Abandoning capital assets. |
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2 | |
Inherent risk for prepaid insurance typically is low because |
| | A) | Policies generally expire in the same fiscal year in which they were acquired. |
| | B) | Insurance is expensed when paid. |
| | C) | Insurance typically is paid for after it is used. |
| | D) | The account does not involve complex accounting issues. |
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3 | |
Which of the following is not an example of segregations of duties in the property management process? |
| | A) | Property records function should be separate from the general ledger function. |
| | B) | The employee who computes depreciation for accounting purposes should be separate from the employee who computes depreciation for tax purposes. |
| | C) | The property records function should be separate from the custodial [handling of assets] function. |
| | D) | The employee responsible for taking a physical inventory of property should be independent of the record-keeping function. |
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4 | |
Which of the following is a plausible explanation when a client's ratio of depreciation expense to related property, plant, and equipment is lower than the previous year? |
| | A) | The useful lives for property, plant, and equipment are too short. |
| | B) | The salvage values assigned to property, plant, and equipment are too low. |
| | C) | There are some assets that became fully depreciated in the previous year. |
| | D) | Goodwill impairments were incorrectly excluded from the numerator of the ratio. |
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5 | |
Which of the following would test the audit objective of completeness for property, plant, and equipment? |
| | A) | Select a sample of additions to property, plant, and equipment and then examine the related vendor invoices. |
| | B) | Select a sample of additions to property, plant, and equipment and then physically examine the asset. |
| | C) | Physically examine a sample of assets and make sure that they are included in the property, plant, and equipment subsidiary ledger. |
| | D) | Test depreciation expense calculations for a sample of property, plant, and equipment. |
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6 | |
When there are numerous plant asset transactions during the year, an auditor who plans to assess control risk at a high level usually performs: |
| | A) | Extensive test of controls and limited tests of current year transactions. |
| | B) | Limited or no tests of controls and extensive tests of current year transactions and ending balances. |
| | C) | Primarily analytical procedures on year end balances. |
| | D) | Primarily analytical procedures on current year transactions. |
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7 | |
In testing plant asset account balances, an auditor decides to physically examine a sample of new additions listed on a client-prepared analysis. The procedure most likely contains evidence concerning management's assertion of: |
| | A) | Valuation. |
| | B) | Existence. |
| | C) | Rights & Obligations. |
| | D) | Completeness. |
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8 | |
In auditing intangible assets, an auditor would likely review or recomputed amortization expense and determine whether the write-off period appears reasonable. This would support management's assertion of: |
| | A) | Valuation |
| | B) | Existence |
| | C) | Completeness |
| | D) | Rights & obligations |
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9 | |
In performing a search for unrecorded retirements of plant assets, an auditor most likely would: |
| | A) | Analyze the client's repairs & maintenance account and then tour the plant facilities. |
| | B) | Tour the client facilities and then inspect the client's plant asset ledger along with insurance and tax records. |
| | C) | Inspect the client's plant asset ledger along with insurance and tax records, and then tour the facilities. |
| | D) | Tour the client facilities and then analyze the repairs and maintenance account. |
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10 | |
Which of the following is the most important internal control procedure over acquisitions of property, plant, and equipment? |
| | A) | Establishing a written company policy distinguishing between capital and revenue expenditures. |
| | B) | Using a budget to forecast and control acquisitions and retirements. |
| | C) | Analyzing monthly variances between authorized expenditures and actual costs. |
| | D) | Requiring acquisitions to be made by user departments. |
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