Which of the following procedures would an auditor most likely perform in obtaining evidence about propriety of PPE additions?

FAR EASTERN UNIVERSITY AUDIT OF PROPERTY, PLANT AND EQUIPMENT

AUDITING C.T.ESPENILLA

C.T.ESPENILLA

Page 1

AUDIT OF PPE-PROBLEM 1:

1. The audit procedure of analyzing the repairs and maintenance accounts is designed

primarily to provide evidence in support of the audit proposition that all

Expenditures for fixed assets have been recorded in the proper period.

Capital expenditures have been properly authorized.

Noncapitalizable expenditures have been properly expensed.

Expenditures for fixed assets have been capitalized.

2. The audit procedure of analyzing the PPE additions for the year is designed primarily to

provide evidence of which financial statement assertion over PPE

Completeness and Valuation

3. When an entity has few property and equipment transactions during the year, the

continuing auditor usually carries out

A complete review of the related internal controls and performs test of the

controls on which the entity relies.

A complete review of the related internal controls and performs analytical

review tests to verify current-year additions to property and equipment.

A preliminary review of the related internal controls and performs a thorough

examination of the balances at the beginning of the year.

A preliminary review of the related internals controls and performs extensive

tests of current-year property and equipment transactions.

4. An auditor may conclude that depreciation charges are overstated if he or she notes

Large amounts of fully depreciated assets.

Continuous trade-ins of relatively new assets.

Excessive recurring losses on retired assets.

Insured values greatly in excess of book values.

5. In violation of company policy, Lilac Company erroneously capitalized the cost of painting

its warehouse. The auditor examining Lilac’s financial statements would be most likely to

detect this when

6. Equipment acquisitions that are misclassified as maintenance expense most likely would

be detected by an internal control that provides for

Segregation of duties of employees in the accounts payable department.

Independent verification of invoices for disbursements recorded as equipment

acquisitions.

Investigation of variances within a formal budgeting system.

Authorization by the board of directors of significant equipment acquisitions.

7. Analysis of which account is least likely to reveal evidence relating to recorded retirement

of equipment?

a. Accumulated depreciation.

b. Insurance expense.

c. Property, plant and equipment.

d. Purchase returns and allowances.

Discussing capitalization policies with Lilac’s controller.

Examining maintenance expense accounts.

Noting, while observing the physical inventory being taken, that the

warehouse had been painted.

Examining the construction work orders supporting items capitalized during

the year.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Why is this page out of focus?

This is a Premium document. Become Premium to read the whole document.

Which one of the following evidence collecting procedures is likely to be the most effective in testing the completeness of accounts receivable?

Which is the best audit procedure to obtain evidence to support the legal ownership of real property?

Which of the following explanations might satisfy an auditor who discovers significant debits to an accumulated depreciation account quizlet?

Which of the following accounts would most likely be reviewed by the auditor to gain reasonable assurance that additions to the equipment account are not understated?