EBK AUDITING AND ASSURANCE SERVICES
EBK AUDITING AND ASSURANCE SERVICES
16th Edition
ISBN: 9780134067117
Author: Hogan
Publisher: VST
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Chapter 19, Problem 17.1MCQ
To determine

Identify the activity that auditor may note where annual depreciation expense is too low for a class of assets.

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3. Which of the following is not an inherent risk related to long-lived asset. accounts? a. Failing to record asset disposals. b. `Capitalizing repairs and maintenance expense. c. Changing depreciation estimates to manage earnings. d. All of the above.
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.
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.
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