Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
40. A normal audit procedure is to analyze the current year’s repairs and maintenance accounts
to provide evidence in support of the audit proposition that
41. Which of the following is the best evidence of real estate ownership at the balance sheet
date?
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
42. Which of the following audit procedures would be least likely to lead the auditor to find
unrecorded fixed asset disposals?
43. In testing for unrecorded retirements of equipment, an auditor most likely would
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
44. An auditor analyzes repairs and maintenance accounts primarily to obtain evidence in
support of the audit assertion that all
45. Which of the following explanations might satisfy an auditor who discovers significant
debits to an accumulated depreciation account?
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
46. In testing plant and equipment balances, an auditor may inspect new additions listed on the
analysis of plant and equipment. This procedure is designed to obtain evidence concerning
management’s assertion(s) about
47. Which of the following explanations most likely would satisfy an auditor who questions
management about significant debits to the accumulated depreciation accounts?
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
48. By selecting a sample of additions to property, plant, and equipment and then examining the
related vendor invoices, the auditor is testing which of the following assertions for property,
plant, and equipment?
49. Testing a sample of repairs and maintenance items to ensure that they were properly
classified as repairs as opposed to property, plant, and equipment tests which of the following
assertions for the property, plant, and equipment account?
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
50. Testing a sample of repairs and maintenance expense items to ensure that they were
properly classified as repairs as opposed to property, plant, and equipment tests which of the
following assertions for the repairs and maintenance expense account?
51. Auditors will examine the insurance register primarily to
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
52. If the ratio of insurance expense to related property, plant, and equipment is higher than
expected, which of the following is a plausible explanation?
53. Which of the following is the most important control activity over acquisitions of property,
plant, and equipment?
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
54. In an interview with the plant manager regarding operations, the auditor is most likely to
obtain evidence that raises concerns regarding
55. Due to a weakness observed in internal control over recording retirements of equipment, the
auditor may decide to
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
56. The controller of Excello Manufacturing, Inc., wants to use ratio analysis to identify the
possible existence of idle equipment or the possibility that equipment has been disposed of
without having been written off. Which of the following ratios would best accomplish this
57. If the ratio of repairs and maintenance expense to property, plant, and equipment is higher
than expected, which of the following is a plausible explanation?
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
58. Which of the following best describes the independent auditor’s approach to obtaining
satisfaction concerning depreciation expense in the income statement?
59. In performing a search for unrecorded retirements of fixed assets, an auditor most likely
would
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
60. Determining that proper amounts of depreciation are expensed provides assurance about
management’s assertions of presentation and disclosure and
61. Describe the types of information that should be included in the schedule of prepaid
insurance that is used by the auditor as the basis for auditing prepaid insurance.
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
62. Auditors can usually gather sufficient, competent evidence on prepaid insurance by
performing substantive analytical procedures. Why is this?
63. List two ways an auditor can test the existence and completeness of insurance policies.
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
64. Property, plant, and equipment is often a significant portion of a company’s assets. Describe
the inherent risk factors that can affect the audit of this account.
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
65. For each of the following tests, state whether it is a test of details of account balances or a
test of details of transactions. Then note for which property management assertion the test
66. What tests do auditors typically perform on a lead schedule for property, plant, and
equipment and what assertion are they testing?
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
67. For each analytical procedure listed below, identify a potential misstatement in the property
management accounts it could help find.
68. There are a number of important disclosure items to consider when auditing the property
management process. List two. Where in the financial statements can some of the disclosures
relating to property, plant, and equipment be found?
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
69. How do accounting standards regarding accounting for the impairment or disposal of
long-lived assets affect the audit of property, plant, and equipment?
70. Identify the types of transactions that occur in the property management process.
There are four types of property, plant, and equipment transaction that may occur. They
include:
Chapter 14 – Auditing the Financing/Investing Process: Prepaid Expenses, Intangible Assets, and Property, Plant,
and Equipment
71. Match each of the following intangible assets with its proper general category