Multiple Choice Questions
a. Analysis of which account is least likely to reveal evidence relating to recorded retirement of equipment?
(1) Accumulated depreciation.
(2) Insurance expense.
(3) Property, plant, and equipment.
(4) Purchase returns and allowances.
b. Which of the following explanations most likely would satisfy an auditor who questions management about significant debits to the accumulated depreciation accounts?
(1) The estimated remaining useful lives of plant assets were revised upward.
(2) Plant assets were retired during the year.
(3) The prior year’s depreciation expense was erroneously understated.
(4) Overhead allocations were revised at year-end.
c. Treetop Corporation acquired a building and arranged mortgage financing during the year. Verification of the related mortgage acquisition costs would be least likely to include an examination of the related:
(2) Canceled checks.
(3) Closing statement.
(4) Interest expense.
d. In testing plant and equipment balances, an auditor may select recorded additions in the analysis of plant and equipment and inspect the actual asset(s) involved. Which management assertion is this procedure most directly related to?
e. A search for overstated property, plant, and equipment purchases would most likely include:
(1) Accounts receivable.
(2) Property, plant, and equipment.
(3) Purchase discounts.
(4) Repairs and maintenance expense.