Question

MULTIPLE-CHOICE QUESTIONS
1. Long-lived assets include which of the following?
a. Tangible assets such as equipment.
b. Intangible assets such as patents.
c. Natural resources.
d. All of the above.

2. Which of the following statements is true?
a. Existence and valuation assertions related to long-lived assets are usually the most relevant assertions.
b. A concern regarding the existence of long-lived assets relates to whether management has properly recorded deprecation.
c. Depletion expense is not an account that would be included when auditing long-lived assets.
d. All of the above statements are true.

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.

4. Which of the following risks is an inherent risk related to asset impairment?
a. Determining asset impairment is based on management judgment.
b. It is difficult to identify the costs associated with the discovery of natural resources.
c. Management might have incentives to not record all asset disposals.
d. All of the above are inherent risks related to asset impairment.

5. Which of the following statements is false regarding fraud risk factors related to long-lived assets?
a. A potential fraud scheme involves not removing sold assets from the books.
b. Because long-lived assets are typically an audit area of low risk, auditors do not need to perform brainstorming activities related to long-lived assets.
c. Management might use unreasonably long depreciable lives in an effort to reduce expenses.
d. None of the above statements is false.

6. Which of the following techniques can be used by management to overstate long-lived assets?
a. Overvalue existing assets.
b. Include fictitious assets on the financial statements.
c. Capitalize transactions that should be expensed.
d. All of the above.

7. Which of the following controls would be most useful in providing reasonable assurance about the valuation of tangible assets?
a. A policy requiring the reconciliation of the physical asset count with the property ledger.
b. A policy requiring that deprecation categories and lives be periodically assessed.
c. A formal budgeting process.
d. Written policies requiring authorization for the acquisition of long-lived assets.

8. Which of the following controls should management have in place to provide reasonable assurance about asset impairment judgments?
a. A policy requiring the reconciliation of the physical asset count with the property ledger.
b. Limits to physical access of long-lived assets.
c. A systematic process to identify assets that are not currently in use.
d. A formal budgeting process.



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  • CreatedSeptember 22, 2014
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