MULTIPLE-CHOICE QUESTIONS
1. An auditor performing preliminary analytical procedures scans the repairs and maintenance accounts. Which of the following statements is consistent with what the auditor is most likely focused on?
a. Expenditures for long-lived assets have not been charged to expense.
b. Expenditures for long-lived assets have been properly approved.
c. Expenditures for long-lived assets have been recorded in the correct period.
d. The auditor would not be performing scanning as a preliminary analytical procedure.

2. Which of the following analyses might an auditor perform as part of preliminary analytical procedures?
a. Develop an overall estimate of depreciation expense.
b. Compare capital expenditures with the client's capital budget.
c. Perform a trend analysis of the ratio of depreciation expense to total depreciable long-lived tangible assets.
d. All of the above could be performed as part of preliminary analytical procedures.

3. Assume that the auditor decides to only perform substantive tests of details when auditing the equipment account. Which of the following statements best describes the circumstances associated with the client being audited?
a. The client does not have effective controls over equipment.
b. The equipment account involves only a few assets of relatively high value.
c. Either a. or b. could be descriptive of the circumstances associated with the client being audited.
d. Neither a. nor b. would be descriptive of the circumstances associated with the client being audited.

4. Assume that a client's controls over recording retirements of long-lived tangible assets are not well designed. Which of the following procedures would the auditor plan to perform as a way of responding to the heightened risk of material misstatement?
a. Select long-lived tangible assets recorded in the property ledger and locate them for inspection.
b. Inspect long-lived tangible assets located at the client location and trace those assets to the property ledger.
c. Review the tangible long-lived asset property ledger to see if depreciation was recorded on each tangible long-lived asset.
d. The auditor would perform all of the above procedures to respond to the heightened risk of material misstatement.

5. Which of the following situations would lead an auditor to test controls over long-lived assets?
a. Substantive analytical procedures suggested that controls over long-lived assets were not effective.
b. Risk assessment procedures indicated that controls were effectively designed.
c. Tests of details identified many errors in recording long-lived asset transactions.
d. The auditor has decided that the additional effort to test controls would not exceed the potential reduction in substantive procedures.

6. To test the effectiveness of controls over asset impairment, the auditor could perform which of the following procedures?
a. Perform analytical procedures.
b. Send confirmations to the management specialist who performed work related to the impairment.
c. Inquire of management as to its process for determining assessment impairment.
d. Inspect the asset for potential impairment.

7. When auditing intangible assets, the auditor would likely recompute amortization and determine whether management's recorded amount is reasonable. When performing this procedure which assertion is the auditor primarily gathering evidence for?
a. Completeness.
b. Existence.
c. Valuation.
d. Rights and obligations.

8. As part of auditing equipment, the auditor will inspect new equipment additions selected from the client's property ledger. The procedure will provide evidence about which of the following assertions?
a. Completeness.
b. Existence.
c. Valuation.
d. Rights and obligations.