Connect Access Card for Principles of Auditing & Other Assurance Services
21st Edition
ISBN: 9781260299366
Author: Ray Whittington, Kurt Pany
Publisher: McGraw-Hill Education
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Chapter 13, Problem 32BOQ
To determine
Identify the appropriate answer related to the reason behind the insufficient
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The auditor may note that annual depreciation expense is too low for a class of assetsby noting(1) insured values greatly in excess of carrying amounts.(2) large numbers of fully depreciated assets are still in use.(3) continuous trade-ins of relatively new assets.(4) excessive recurring losses on assets retired.
Which of the following is a false statement about depreciation?
It has no impact on cash
It represents the physical deterioration of an asset
It exists because of the matching principle
Accelerated methods of calculating depreciation are acceptable under GAAP
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.
Chapter 13 Solutions
Connect Access Card for Principles of Auditing & Other Assurance Services
Ch. 13 - Prob. 1RQCh. 13 - K-J Corporation has current assets of 5 million...Ch. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Explain the use of a system of authorizations for...Ch. 13 - Moultrie Company discovered recently that a number...Ch. 13 - Does a failure to record the retirement of...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQ
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Gibson Manufacturing Company acquired new factory...Ch. 13 - Prob. 17RQCh. 13 - Do the auditors question the service lives adopted...Ch. 13 - Prob. 19RQCh. 13 - Explain how the existence of lease agreements may...Ch. 13 - Prob. 21RQCh. 13 - Prob. 22QRACh. 13 - Prob. 23QRACh. 13 - Gruen Corporation is a large diversified company...Ch. 13 - Prob. 25QRACh. 13 - Prob. 26QRACh. 13 - Prob. 27QRACh. 13 - Prob. 28QRACh. 13 - Prob. 29QRACh. 13 - Prob. 30QRACh. 13 - Prob. 31QRACh. 13 - To assure accountability for fixed-asset...Ch. 13 - Prob. 32BOQCh. 13 - Which of the following is an internal control...Ch. 13 - Which of the following accounts should be reviewed...Ch. 13 - Prob. 32EOQCh. 13 - Prob. 32FOQCh. 13 - Which of the following statements is not typical...Ch. 13 - Prob. 32HOQCh. 13 - Prob. 32IOQCh. 13 - An effective procedure for identifying unrecorded...Ch. 13 - Which of the following is not an overall test of...Ch. 13 - Prob. 32LOQCh. 13 - Prob. 33OQCh. 13 - Analysis of which account is least likely to...Ch. 13 - Prob. 34BOQCh. 13 - Prob. 34COQCh. 13 - Prob. 34DOQCh. 13 - A search for overstated property, plant, and...Ch. 13 - The following are typical questions that might...Ch. 13 - Prob. 36PCh. 13 - Prob. 37PCh. 13 - Chem-Lite, Inc., maintains its accounts on the...Ch. 13 - Prob. 39PCh. 13 - You are reviewing the property, plant, and...
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- The client has changed from double declining balance to straight line depreciation for its equipment. The effect on this year’s income is material, and no information is disclosed in footnotes related to the change. You believed the change aligns with change in usage pattern of the equipment, except that adequate disclosure is made relating to the change of depreciation method after your advice, will your opinion be different? Q) Discuss the most appropriate type of opinion the auditor should issue. Explain briefly the reason for the opinion.arrow_forwardWhich of the following is true regarding special issues in accounting for long-term assets? A. An assets useful life can never be changed. B. An assets salvage value can never be changed. C. Depreciation expense calculations may need to be updated using new and more accurate estimates. D. Asset values are never reduced in value due to physical deterioration.arrow_forwardIn 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_forward
- The most appropriate reason for an increase in depreciation expense is that a. Depreciation for prior periods was overstated. b. Major repairs were not recorded. c. A depreciable asset was impaired. d. Retained earnings have been appropriated for a possible loss on retirement. e. Based on a re-evaluation, estimated salvage values have been lowered.arrow_forwardIt is the gradual diminution of the useful value of tangible property resulting from wear and tear and normal obsolescence. It is also applied to the amortization of intangible assets the use of which in the trade or business is definitely limited in duration. Group of answer choices Depreciation Depletion Obsolescence Bad debtsarrow_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_forward
- IFRS requires annual reviews of long-lived assets (other than goodwill) for reversal indicators. A loss may be reversed up to the newly estimated recoverable amount, not to exceed the initial carrying amount adjusted for depreciation. This is a significant departure from GAAP, so what are the financial statement implications? Is it a good thing or bad?arrow_forwardwhich of the following regarding errors is correct Select one: a. intentional misstatement of the financial statements, b. misappropriation of assets is an kind of errors c. a mistake in recording the date of a sale invoice is an example of the errors d. it is more difficult for the auditor to detect because it is not intentionalarrow_forwardAn assessment of accounting practices for asset impairments is especially important in the context of financial reporting quality in that it requires the exercise of considerable management judgement and reporting discretion. The importance of this issue is heightened during periods of ongoing economic uncertainty as a result of the need for companies to reflect the loss of economic value in a timely fashion through the mechanism of asset write-downs. There are many factors which can affect the quality of impairment accounting and disclosures. These factors include changes in circumstance in the reporting period, the market capitalization of the entity, the allocation of goodwill to cash generating units, valuation issues and the nature of the disclosures. Required: Discuss the importance and significance of the above factors when conducting an impairment test under IAS 36 Impairment of Assets.arrow_forward
- Which of the following statements about depreciation is false?: Depreciation does not apply to most buildings because their usefulness and revenue producing ability generally remain intact over time. Recording depreciation in each period is an application of the expense recognition (matching) principle. Depreciation is required because of wear-and-tear and technological obsolescence. The balance in accumulated depreciation represents the total cost that has been charged to expense since placing an asset in service.arrow_forwardWhich of the following statements about MACRS is false?A. Depreciable assets are assumed to have no residual or salvage value.B. Every depreciable asset is assigned to one of ten recovery periods.C. Allowable depreciation methods are based on the assets assigned recovery period.D. None of the above is false. please explain without plagiarismarrow_forwardWhen the auditor wants to test the asset for impairment, the auditor would most likely be concerned with the recoverable amount of an intangible asset. For this purpose, the recoverable amount of an intangible asset is not: a. Fair value less cost to sell b. Value in use c. Fair value less cost to sell or value in use, whichever is lower d. Fair value less cost to sell or value in use, whichever is higherarrow_forward
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