What is the most important balance related audit objective for depreciation expense?
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Uploaded byMaria Ferlin Andrin Morales 0% found this document useful (0 votes) 277 views 14 pages Description:audtheo Original TitleAud Copyright© © All Rights Reserved Available FormatsDOCX, PDF, TXT or read online from Scribd Share this documentDid you find this document useful?Is this content inappropriate?Report this Document 0% found this document useful (0 votes) 277 views14 pages Chapter 19 Auditing Theory: Multiple-Choice QuestionsOriginal Title:Aud Uploaded byMaria Ferlin Andrin Morales Description:audtheo Full description Chapter 19 Multiple-Choice Questions 1. easy Which of the following accounts is associated with a transaction cycle other than acquisition and payment? aa.Common stock. b.Property, plant and equipment. c.Accrued property taxes. d.Income tax expense. 2.Property, plant, and equipment are assets that: easya.have expected lives of more than one year. d b.are used in the business. c.are not acquired for resale. d.meet all of the requirements stated above. 3. easy Which of the following expenses is not typically evaluated as part of the audit of the acquisition and payment cycle? ca.Depreciation expense. b.Insurance expense. c.Bad debts expense. d. Property tax expense. 4.Debits to manufacturing equipment arise from which cycle(s)? easya.Sales and collection cb.Payroll c.Acquisition and disbursement d.Inventory and warehousing 5. easy It should ordinarily be unnecessary to examine supporting documentation for each addition to property, plant, and equipment, but it is customary to verify: da.all large transactions. b.all unusual transactions. c.a representative sample of typical additions. d.all three of the above. 6.The auditor must know the client’s capitalization policies to determine whether acquisitions are: easy d Recorded in accordance with GAAP Treated consistently with those of the preceding year Necessary a. YesYesYes b.YesNoNo c.NoNoNo d.YesYesNo 7.To be capitalized as part of property, plant and equipment, assets must: easya.have expected useful lives of more than one year. db.not be acquired for resale. c.be useful in multiple productive capacities within the organization. d.a and b, but not c. 8.The primary accounting record for manufacturing equipment and other fixed assets is the: Arens/Elder/Beasley What is the audit procedure for depreciation?The auditor calculates an expected value for depreciation per asset category based on the current year's fixed asset cost and the client's depreciation policy. Some assumptions may need to be used in relation to the timing of fixed asset additions and disposals during the year.
What is the main objective of balance sheet audit?A balance sheet audit includes verification of the company's provisions for depreciation and other anticipated losses, to ensure they are at reasonable levels.
What are the objectives for making provision for depreciation?The main objective of providing depreciation is to Create funds for replacement of fixed assets. The main objective of charging depreciation is to accumulate adequate fund to replace old asset with the new one after the useful life.
What is the importance of depreciation in accounting?Depreciation allows for companies to recover the cost of an asset when it was purchased. The process allows for companies to cover the total cost of an asset over it's lifespan instead of immediately recovering the purchase cost. This allows companies to replace future assets using the appropriate amount of revenue.
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