SOLVED

11) You are auditing Manufacturing Company and testing the audit related objective of completeness for the equipment accounts. Which of the following audit procedures is most likely to achieve your objective? A) Examine vendor invoices and receiving reports B) Physically examine assets C) Examine vendor invoices of closely related accounts such as repairs and maintenance D) Trace individual acquisitions to the fixed asset master file 12) Which of the following audit procedures would be the most correct in determining the audit objective of existence for the equipment account in the fixed asset master file? A) Examine vendor invoices and receiving reports B) Review transactions near the balance sheet date C) Recalculate vendor invoices D) Examine vendor invoices for correct accounting treatment 13) Inadequate controls and misstatements discovered through tests of controls and substantive tests of transactions are an indication of the likelihood of misstatements in: A) the balance sheet. B) the income statement. C) the cash flow statement. D) both the income statement and the balance sheet. 14) Failure to capitalize a fixed asset at the correct amount would impact which financial statements until the company disposes of the asset? A) The balance sheet only B) The income statement only C) The cash flow statement only D) Both the income statement and the balance sheet 15) Which of the following tests are typically not necessary when auditing a client’s schedule of recorded disposals? A) Footing the schedule. B) Tracing schedule totals to the general ledger. C) Tracing cost and accumulated depreciation of the disposals to the property master file. D) All of the above are necessary. 16) Which of the following would indicate a deficiency in internal controls in the acquisition and payment cycle? A) Repairs and maintenance accounts are reviewed for unusual entries each quarter B) Acquisitions are made and approved by the department that will use the equipment C) Acquisitions of equipment greater than $1,000 are to be capitalized D) Acquisitions of equipment less than $1,000 are to be expensed as incurred 17) A set of records for each piece of equipment that includes descriptive information, date of acquisition, original cost, current year depreciation, and accumulated depreciation is the: A) acquisitions journal. B) depreciation schedule. C) fixed asset master file. D) file of purchase requisitions. 18) In testing acquisitions the auditor needs to understand the appropriate accounting guidance related to acquisition accounting. Which of the following is NOT an accounting consideration for the auditor as regards to acquisition cost? A) Inclusion of material transportation and installation costs B) Recording of trade-in costs C) Allocating costs when building and equipment are purchased at one price D) Verifying that purchased equipment amounts correspond to the budgeted amount 19) Methods used to determine if there are legal encumbrances related to fixed assets include all but which of the following? A) Reading terms of loan and credit agreements B) Reviewing loan confirmations received from banks C) Having discussions with the client or sending letters to legal counsel D) All of the above may be used to identify legal encumbrances 20) The test of details of balances procedure which requires a “recalculation of investment credit” satisfies the audit objective of: A) classification. B) detail tie-in. C) existence. D) accuracy.