Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 13, Problem 1RQ
To determine
Explain the factors related to the verification of plant and equipment that are not applicable to audit work.
Expert Solution & Answer
Explanation of Solution
Verification of the assets:
It is a process of providing confirmation regarding a specific event and activity. When the auditor performs audit them he verify the transactions for their accuracy and originality.
Explain the factors related to the verification of plant and equipment that are not applicable to audit work:
- The high value of the plant and equipment requires the auditor’s verification. The high value of the item could affect the
balance sheet to a large extent. The value of the current assets is relatively low. - The frequency of the transaction or change in the plant and equipment is quite low. The current assets have a high turnover. Cash and inventory fluctuate very swiftly.
- The cut-off transaction related to the plant and equipment would not affect the profitability of the company to the extent that the current asset would affect. Most of the plant and equipment transactions are recorded in the balance sheet of the company.
Thus, the high value of the items, frequency of the transaction and impact of the cut-off transactions are the factors related to the verification of plant and equipment that are not applicable to audit work.
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Students have asked these similar questions
In performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions?
a. Is depreciation calculation and recording automated?
b. Is there periodic physical count and tagging of property, plant and equipment? Is the result of the count reconciled to ledgers and general ledgers?
c. Both a and b.
d. Neither a nor b.
In performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the
client personnel which of the following questions?
a. Is depreciation calculation and recording automated?
b. Is there periodic physical count and tagging of property, plant and equipment? Is the result of the count
reconciled to ledgers and general ledgers?
C. Both a and b.
d. Neither a nor b.
Oc
O a
In performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions?
a. Is depreciation calculation and recording automated?
b. Is there periodic physical count and tagging of property, plant and equipment? Is the result of the count reconciled to ledgers and general ledgers?
c. Both a and b.
d. Neither a nor b.
Group of answer choices
a
c
b
d
Chapter 13 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 13 - Prob. 1RQCh. 13 - K-J Corporation has current assets of 5 million...Ch. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Explain the use of a system of authorizations for...Ch. 13 - Moultrie Company discovered recently that a number...Ch. 13 - Does a failure to record the retirement of...Ch. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQ
Ch. 13 - Prob. 11RQCh. 13 - Prob. 12RQCh. 13 - Prob. 13RQCh. 13 - Prob. 14RQCh. 13 - Prob. 15RQCh. 13 - Gibson Manufacturing Company acquired new factory...Ch. 13 - Prob. 17RQCh. 13 - Do the auditors question the service lives adopted...Ch. 13 - Prob. 19RQCh. 13 - Explain how the existence of lease agreements may...Ch. 13 - Prob. 21RQCh. 13 - Prob. 22QRACh. 13 - Prob. 23QRACh. 13 - Gruen Corporation is a large diversified company...Ch. 13 - Prob. 25QRACh. 13 - Prob. 26QRACh. 13 - Prob. 27QRACh. 13 - Prob. 28QRACh. 13 - Prob. 29QRACh. 13 - Prob. 30QRACh. 13 - Prob. 31QRACh. 13 - To assure accountability for fixed-asset...Ch. 13 - Prob. 32BOQCh. 13 - Which of the following is an internal control...Ch. 13 - Which of the following accounts should be reviewed...Ch. 13 - Prob. 32EOQCh. 13 - Prob. 32FOQCh. 13 - Which of the following statements is not typical...Ch. 13 - Prob. 32HOQCh. 13 - Prob. 32IOQCh. 13 - An effective procedure for identifying unrecorded...Ch. 13 - Which of the following is not an overall test of...Ch. 13 - Prob. 32LOQCh. 13 - Prob. 33OQCh. 13 - Analysis of which account is least likely to...Ch. 13 - Prob. 34BOQCh. 13 - Prob. 34COQCh. 13 - Prob. 34DOQCh. 13 - A search for overstated property, plant, and...Ch. 13 - The following are typical questions that might...Ch. 13 - Prob. 36PCh. 13 - Prob. 37PCh. 13 - Chem-Lite, Inc., maintains its accounts on the...Ch. 13 - Prob. 39PCh. 13 - You are reviewing the property, plant, and...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Give examples and practice on the situation of auditing fixed assets at the client as follows (in the situation, the information is required): - Information on the type of entity and the accounting period; - Information on internal control of tangible fixed assets and two (2) weaknesses occurring in the management and accounting of tangible fixed assets at the entity. You must mention 2 control procedures to prevent the above weakness.arrow_forwardIn performing risk assessment procedures for property, plant and equipment, an auditor may inquire of the client personnel which of the following questions? a. Is depreciation calculation and recording automated? b. Is there periodic physical count and tagging of property, plant and equipment? Is the result of the count reconciled to ledgers and general ledgers? C. Both a and b. d. Neither a nor b. O a Od Oc Obarrow_forwardWhich of the following is not a scope of internal auditors? Efficient Use of Resources Should work independently Compliance with Policies and Procedures Safeguarding the Assetsarrow_forward
- Which of the following best describes why auditors audit leased assets in conjunction with the audit of property, plant & equipment? Multiple Choice (B & D are incorrect) A. Most leased assets should be capitalized. B. Repairs and maintenance expense is affected by leased assets. C. Management may choose to lease assets rather than buy them. D. Leased assets have a higher risk of misstatement.arrow_forwardexplain. If, after obtaining an initial understanding of a client's internal control, the auditor wishes to further reduce the assessed level of control risk relating to plant asset transactions, the auditor should next Make extensive substantive tests of plant asset balances. Establish the physical existence of current year additions. Complete the plant asset section of the internal accounting control questionnaire. Further test those internal control procedures relating to processing and recording plant asset transactions.arrow_forwardThe following are typical questions that might appear on an internal control questionnaire relating to plant and equipment: Has a dollar minimum been established for expenditures to be capitalized? Are subsidiary ledgers for plant and equipment regularly reconciled with general ledger controlling accounts? Assuming that the operating effectiveness of each of the above procedures is found to be inadequate, describe how the auditors might alter their substantive procedures to compensate for the increased level of risks of material misstatements.arrow_forward
- Audit firms may have a standardized audit programs for auditing long-lived assets but auditors must still customize the audit program based on the assement of the risk of material misstatement. Why/how?arrow_forwardWhen auditing the existence assertion for an asset, auditors proceed from thea. Financial statement amounts back to the potentially unrecorded items.b. Potentially unrecorded items forward to the financial statement amounts.c. General ledger back to the supporting original transaction documents.d. Supporting original transaction documents to the general ledger.arrow_forwardThe auditing procedure that could least likely lead the auditor to find unrecorded property, plant, and equipment disposals isA. Vouching purchase invoices for asset additions.B. Review of voucher for the payment of property taxes.C. Review of miscellaneous income accountD. Review of loan agreement for fixed assets used as collateralE. None of themarrow_forward
- When an auditor reviews additions to the equipment (fixed asset) account to make sure that fixed assets are not overstated, she wants to obtain evidence as to management’s assertion regardinga. Completeness.b. Existence.c. Valuation and allocation.d. Rights and obligations.e. Occurrencearrow_forwardWhat is the relationship between the audit of property, plant, andequipment accounts and the audit of repair and maintenance accounts? Explain how theauditor organizes the audit to take this relationship into consideration.arrow_forwardWhat types of audit procedures are typically performed in testing operating effectiveness of controls over the revenue and collection cycle?arrow_forward
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