Initial question:"Explain the relationship between substantive tests of transactions for the acquisition and payment cycle and tests of details of balances for the verification of property, plant, and equipment. Which aspects of property, plant, and equipment are directly affected by the tests of controls and substantive tests of transactions and which are not?"

Response: " The acquisition and payment cycle deals with the accounts that are affected during the purchase of good and services and the cash payments for those purchases (Arens, 2017, p. 605.)As it can be extremely time consuming to verify some of the accounts in the acquisition and payment cycle (inventory, fixed assets, accounts payable and expense accounts) with substantive tests of details of balances, specific tests designed to find monetary misstatements of balances(Arens, 2017, p. 168, 609.)Therefore, an auditor can reduce the time and costs, if control risk is assessed at low, by using tests of control and tests of transactions, the evaluation of the client's record of transaction by verifying the dollar amount of transactions,to verify the acquisition and payment cycle (Arens, 2017, p. 167, 609.)

Property, plant, and equipment accounts, assets with a life of more than a year, are a subcategory of accounts that falls under the acquisition and payment cycle (Arens, 2017, p.637.)Because of the complexity of the property, plant and equipment account many tests often need to be applied to verify if the account is accurate. Aspects of property, plant and equipment directly affected by the test of controls and substantive tests of transactions include the disposal of equipment, verifying current year acquisitions through vendor invoices, verifying the correct disposal of equipment, and verifying the ending balance of the asset account (Arens, 2017, p 641.)Test of controls is particularly important in trusting the balances that have been carried over from previous years in property, plant and equipment, and in the correct recording of property, plant and equipment.Due to the complexity of property, plant, and equipment it is quite possible that an accounting department with poor internal controls could fail to correctly record transactions.One complex transaction that relies less on internal controls or substantive test of transactions forevaluation is the depreciation expense and appreciated depreciation accounts, either substantive analytical procedures, test of details of balances, or a combination are often used evaluate the fair and accurate statement of accounts (Arens, 2017, p 639.)

In addition to the property plant and equipment audit the acquisition and payment cycle has three other subcategories: the audit of prepaid expenses, such as prepaid taxes, patents, deferred charges and goodwill, the audit of accrued liabilities, such as accrued payroll and accrued interest, and the audit of income and expense accounts (Arens, 2017)."

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