EBK AUDITING+ASSURANCE SERVICES
17th Edition
ISBN: 9780135171219
Author: ARENS
Publisher: PEARSON CO
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Chapter 6, Problem 15RQ
To determine
Identify the transaction-related audit objectives that has been violated.
To determine
Identify the transaction-related audit objectives that has been violated, if rather than expensing the acquisition, it had been capitalized as a fixed asset.
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Students have asked these similar questions
An acquisition of a fixed-asset repair by a construction company isrecorded on the wrong date. Which transaction-related audit objective has been violated?Which transaction-related audit objective has been violated if the acquisition had beencapitalized as a fixed asset rather than expensed?
The least effective means for the auditor to determine whether a recorded intangible asset possesses the characteristic of an asset is
a. Vouch the purchase by reference to underlying documentation.
b. Inquire as to the status of the patent application.
c. Evaluate the future revenue-producing capacity of the intangible asset.
d. Analyze the research and development expenditures to determine that only those expenditures possessing future economic benefits have been capitalized.
Which of the following best describes why auditors audit leased assets in conjunction with the audit of property, plant & equipment?
Multiple Choice (B & D are incorrect)
A. Most leased assets should be capitalized.
B. Repairs and maintenance expense is affected by leased assets.
C. Management may choose to lease assets rather than buy them.
D. Leased assets have a higher risk of misstatement.
Chapter 6 Solutions
EBK AUDITING+ASSURANCE SERVICES
Ch. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - What are the six elements of professional...Ch. 6 - What are the five elements of an effective...Ch. 6 - Describe two of the more common judgment traps and...
Ch. 6 - Identify the cycle to which each of the following...Ch. 6 - Why are sales, sales returns and allowances, bad...Ch. 6 - Prob. 13RQCh. 6 - Prob. 14RQCh. 6 - Prob. 15RQCh. 6 - Prob. 16RQCh. 6 - Prob. 17RQCh. 6 - Prob. 18RQCh. 6 - Prob. 19RQCh. 6 - Prob. 20RQCh. 6 - Prob. 21.1MCQCh. 6 - Prob. 21.2MCQCh. 6 - Prob. 21.3MCQCh. 6 - Prob. 22.1MCQCh. 6 - Prob. 22.2MCQCh. 6 - Prob. 22.3MCQCh. 6 - Prob. 23.1MCQCh. 6 - Prob. 23.2MCQCh. 6 - Prob. 23.3MCQCh. 6 - Prob. 24.1MCQCh. 6 - Prob. 24.2MCQCh. 6 - Prob. 24.3MCQCh. 6 - Prob. 25DQPCh. 6 - Prob. 26DQPCh. 6 - Prob. 27DQPCh. 6 - Prob. 28DQPCh. 6 - Prob. 29DQPCh. 6 - Prob. 30DQPCh. 6 - Prob. 31DQPCh. 6 - Prob. 32DQPCh. 6 - Prob. 33DQPCh. 6 - Prob. 34DQP
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- An entity changes its depreciation method for production equipment from straight line method to units of activity method. The effect of this change is pervasively material. The auditor does not concur with the change. The auditor would issue a(n): * Unqualified opinion with an explanatory paragraph. O Adverse opinion O Qualified opinion Unqualified opinionarrow_forwardThe least effective means for the auditor to determine whether a recorded intangible asset possesses the characteristic of an asset is Vouch the purchase by reference to underlying documentation. Inquire as to the status of the patent application. Evaluate the future revenue-producing capacity of the intangible asset Analyze the research and development expenditures to determine that only those expenditures possessing future economic benefits have been capitalized.arrow_forwardHow will the approach for verifying repair expense differfrom that used to audit depreciation expense? Why will the approach be different?arrow_forward
- Assume that the client’s internal controls over the recordingand classifying of fixed asset additions are considered deficient because the individualresponsible for recording new acquisitions has inadequate technical training and limitedexperience in accounting. How will this situation affect the evidence you should accumulate in auditing fixed assets as compared with another audit in which the controls areexcellent? Be as specific as possible.arrow_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_forwardWhich one of the following fraudulent activities constitute misappropriation of assets? Omitting, advancing or delaying recognition of events and transactions Engaging in complex transactions that misrepresent the financial position of the entity. Causing an entity to pay for goods and services not received Concealing, or not disclosing, facts that could affect the recorded amounts. ENarrow_forward
- 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.arrow_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: Fair value less cost to sell Value in use Fair value less cost to sell or value in use, whichever is lower Fair value less cost to sell or value in use, whichever is higherarrow_forwardAssume that the client’s internal controls over the recording and classifying of fixed asset additions are considered weak because the individual responsible for recording new acquisitions has inadequate technical training and limited experience in accounting. How will this situation affect the evidence you should accumulate in auditing fixed assets as compared with another audit in which the controls are excellent? Be as specific as possible.arrow_forward
- Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets? a. Examine property tax records. b. Send confirmations to insurance agents. c. Examine scrap sales accounts. d. Make client inquiries.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_forward7. Which of the following indicators of impairment is considered an internal source of information? a. Significant decline in market value than what is expected as a result of passage of time of normal use. b. Significant changes in technological, market, economic or legal environment in which the entity operates or in the market to which an asset is dedicated. c. Carrying amount of the net assets is more than its market capitalization. d. Significant change with adverse effect to the entity has taken place or will take place, which will affect expected use of asset, e.g., discontinuance, disposal, restructuring plans.arrow_forward
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