Marissa is an audit intern working at Marshall CPA firm. Her supervisor at Marshall CPA firm has explained that the audit of property, plant and equipment and the related accounts ties in to management's expectations of the firm's earnings. Marissa is unclear as to how this relationship works and asks the supervisor to elaborate. Which of the following would be the most accurate response? O The relationship is fairly straightforward. If the client's management is keen to show strong earnings to beat analysts' expectations, they may manipulate depreciation expenses to boost these earnings. O The best way to think about this relationship is to think about how fixed assets are depreciated over time, and the incentive management has to shorten useful lives to decrease depreciation expenses. O The relationship works on the premise that when property, plant and equipment is amortized, the firms earnings are boosted through the accelerated amortization of fixed assets. O None of these answer choices are correct.
Marissa is an audit intern working at Marshall CPA firm. Her supervisor at Marshall CPA firm has explained that the audit of property, plant and equipment and the related accounts ties in to management's expectations of the firm's earnings. Marissa is unclear as to how this relationship works and asks the supervisor to elaborate. Which of the following would be the most accurate response? O The relationship is fairly straightforward. If the client's management is keen to show strong earnings to beat analysts' expectations, they may manipulate depreciation expenses to boost these earnings. O The best way to think about this relationship is to think about how fixed assets are depreciated over time, and the incentive management has to shorten useful lives to decrease depreciation expenses. O The relationship works on the premise that when property, plant and equipment is amortized, the firms earnings are boosted through the accelerated amortization of fixed assets. O None of these answer choices are correct.
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
Chapter14: Completing A Quality Audit
Section: Chapter Questions
Problem 31CYBK
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Question
![Marissa is an audit intern working at Marshall CPA firm. Her supervisor at Marshall CPA firm has explained that the audit of property,
plant and equipment and the related accounts ties in to management's expectations of the firm's earnings. Marissa is unclear as to how
this relationship works and asks the supervisor to elaborate. Which of the following would be the most accurate response?
O The relationship is fairly straightforward. If the client's management is keen to show strong earnings to beat analysts'
expectations, they may manipulate depreciation expenses to boost these earnings.
O The best way to think about this relationship is to think about how fixed assets are depreciated over time, and the incentive
management has to shorten useful lives to decrease depreciation expenses.
The relationship works on the premise that when property, plant and equipment is amortized, the firms earnings are
boosted through the accelerated amortization of fixed assets.
O None of these answer choices are correct.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fefb3926d-a816-4971-85e9-1f0dbdf5436e%2Fe6e0d1ea-66bc-482b-a769-f6e96358e3d9%2Fl8f2p5k_processed.png&w=3840&q=75)
Transcribed Image Text:Marissa is an audit intern working at Marshall CPA firm. Her supervisor at Marshall CPA firm has explained that the audit of property,
plant and equipment and the related accounts ties in to management's expectations of the firm's earnings. Marissa is unclear as to how
this relationship works and asks the supervisor to elaborate. Which of the following would be the most accurate response?
O The relationship is fairly straightforward. If the client's management is keen to show strong earnings to beat analysts'
expectations, they may manipulate depreciation expenses to boost these earnings.
O The best way to think about this relationship is to think about how fixed assets are depreciated over time, and the incentive
management has to shorten useful lives to decrease depreciation expenses.
The relationship works on the premise that when property, plant and equipment is amortized, the firms earnings are
boosted through the accelerated amortization of fixed assets.
O None of these answer choices are correct.
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