the heightened risk of material misstatement.6. Which of the. following techniquesoverstate 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 to7. Which of the following analyses might an auditor perform as part ofpreliminary 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 totaldepreciable long-lived tangible assets.d. All of the above could be performed as part of preliminary analyticalprocedures.8. Assume that the auditor decides to only, perform substantive tests ofdetails when auditing the equipment account. Which of the followingstatements best describes the circumstancės associated with the clientbeing audited?The client does not have effective controls over equipment.b. The equipment account involves only a few assets of relatively highа.value.c. Either a or b could be descriptive of the.circumstances associatedwith the client being audited.d. Neither a nor b would be descriptive of the circumstances associatedwith the client being audited.9. Assume that a client's controls over recording retirements of long-livedtangible assets are not well designed. Which of the following procedureswould the auditor plan to perform as a way of responding to theheightened risk of material misstatement?a. Select long-lived tangible 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 each tangible long-lived asset.d. The auditor would perform all of the above procedures to respond to

The answer is given below: Note: Answering the first question as there are multiple…

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:

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:

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity

Section: Chapter Questions

Problem 20CYBK

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Which statement about depreciation is false?a. A major objective of depreciation accounting is to allocate the cost of using an assetagainst the revenues it helps to generate.b. Depreciation should not be recorded in years in which the market value of the asset hasincreased.c. Obsolescence as well as physical wear and tear should be considered when determiningthe period over which an asset should be depreciated.d. Depreciation is a process of allocating the cost of an asset to expense over its usefullife.
In performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions? A. 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? B. Are depreciation policies in accordance with applicable financial reporting framework? C. All of the choices. D. Are disposals of property, plant and equipment properly authorized, removed from records including depreciation, and recorded in correct accounting period?