Which of the following is not an inherent risk related to long-lived asset accounts?
a. Failing to record asset disposals.
b. Capitalizing repairs and maintenance expense.
c. Changing depreciation estimates to manage earnings.
d. All of these are inherent risks related to long-lived asset accounts.
Which of the following techniques can managers use to prevent the outright theft of long-lived assets?
a. Assign accountability for long-lived assets to specific individuals.
b. Conduct physical counts of existing and new long-lived assets purchased during the year.
c. Capitalize transactions that they should expense.
d. Two of these.
Which of the following controls would be most useful in providing reasonable assurance about the valuation of tangible long-lived assets?
a. Written policies requiring authorization for the acquisition of long-lived assets.
b. A formal budgeting process.
c. A policy requiring that deprecation categories and lives be periodically assessed.
d. A policy requiring the reconciliation of the physical asset count with the property ledger.
Assume that a client's controls over recording retirements of long-lived tangible assets are not well designed. Which of the following procedures would the auditor plan to perform as a way of responding to the heightened risk of material misstatement?
a. Select long-lived tangible assets recorded in the property ledger and locate them for inspection.
b. Review the tangible long-lived asset property ledger to see if depreciation was recorded on each tangible long-lived asset.
c. The auditor would perform all of the above procedures to respond to the heightened risk of material misstatement due to poor client controls over recording retirements.
d. Inspect long-lived tangible assets located at the client location and trace those assets to the property ledger.
Which of the following valuation issues are associated with merger and acquisition activity?
a. Valuing assets of the acquired organization at their FMV at the time of acquisition.
b. Measuring restructuring charges associated with the acquisition.
c. Valuing liabilities of the acquired organization at their FMV at the time of acquisition.
d. All of these.
Patents are an example of long-lived assets.
A fraud scheme that WorldCom top-management employed involved capitalizing items that should have been expensed.
If a client's long-lived assets involve only a few assets of relatively high value, it might be most efficient to test long-lived assets by using only substantive tests of details.
One procedure that the auditor can use to test management's assertion that tangible long-lived assets exist would be to inspect the tangible asset.
Goodwill is the excess of the purchase price over the fair market value of the acquired organization's tangible assets, identifiable intangible assets, and liabilities.
