The auditor performs tests on property, plant and equipment to determine if assets have been pledged as
Question:
The auditor performs tests on property, plant and equipment to determine if assets have been pledged as collateral or title has transferred primarily to assess which assertions?
a.Valuation and completeness.
b.Rights and disclosure.
c.Obligations and legality.
d.Cutoff and accuracy.
An auditor wishes to test the net valuation of the equipment in the financial statements of a client. How will the auditor best perform this testing?
a.Vouch the recorded equipment to an invoice supporting the cost of the equipment when originally purchased.
b.Compare the ID number on the fixed asset schedule to the identification tag on the asset itself.
c.Recalculate annual depreciation expense for major additions and a sample of all other equipment.
d.Confirm material equipment with customers.
Which of the following procedures would evidence the client's control over the existence of machinery and equipment?
a.Useful lives are only entered into the system by the controller.
b.Impairment testing takes place in accordance with a formal assessment of business changes and events as they relate to fixed assets.
c.Fixed assets are assigned a control identification number and that number is permanently affixed to the asset for periodic inventory.
d.Only the CFO can enter additions into the fixed asset module of the system.
Leases should be capitalized on the books of the client if it meets one of four conditions. Which of the following is not one of those four conditions.
a.the lease contract transfers ownership.
b.the lease contains a bargain purchase option.
c.the lease term covers at least 80% of the useful life of the asset.
d.the present value of the minimum lease payments is at least equal to 90% of the assets fair market value.
If a lease does not meet at least one of four conditions described in U.S. GAAP, then it is classified as which of the following?
a.capital lease.
b.operating lease.
c.direct financing lease.
d.sales-type lease.
Accounting and Auditing Research Tools and Strategies
ISBN: 978-1119441915
9th edition
Authors: Thomas Weirich, Thomas Pearson, Natalie Tatiana