27266959
Description
Quiz by Kayla Harbaugh, updated more than 1 year ago
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Created by Kayla Harbaugh
about 4 years ago
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Question 1
Question
Which one of the following factors is not an inherent risk associated with long-lived assets?
Answer
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a. Incomplete recording of disposals.
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b. Impairment of assets.
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c. Obsolescence of assets.
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d. Lack of physical controls over the long-lived assets.
Question 2
Question
Which one of the following approaches does not represent how the auditor will become aware of risks associated with long-lived assets?
Answer
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a. Reviewing the minutes of board of directors’ meetings.
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b. All represent how the auditor will become aware of risks associated with long-lived assets and related expenses.
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c. Obtaining knowledge of the client business.
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d. Reviewing the business plan related to major acquisitions.
Question 3
Question
The tour of the manufacturing plant may best assist the auditor in determining which of the following?
Answer
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a. Management's strategy for assessing impairment.
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b. Estimates of depreciation expense.
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c. Whether all purchases are authorized.
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d. Whether any machinery is inoperative in the production cycle.
Question 4
Question
Which one of the following is not a management assertion relevant to long-lived assets?
Answer
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a. Reporting.
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b. Existence.
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c. Completeness.
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d. Valuation.
Question 5
Question
Which of the following is not a circumstance indicating potential impairment of intangible assets?
Answer
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a. Losses or projections indicating continuing losses associated with an asset used to generate revenue.
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b. A change in circumstances, such as the legal environment or business climate, that could affect the asset’s value.
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c. An accumulation of costs that are significantly in excess of the amount originally expected to be needed to acquire or construct the asset.
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d. The asset generates just as much cash flow as in the past.
Question 6
Question
Which of the following expense accounts is associated with natural resources?
Answer
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a. Depreciation expense.
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b. Amortization expense.
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c. Capitalization expense.
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d. Depletion expense.
Question 7
Question
Which of the following controls related to management’s asset impairment judgments does the auditor need to understand?
Answer
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a. A systematic process to identify assets that are not currently in use.
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b. Projections of future cash flows that is based on management’s strategic plans and economic conditions.
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c. Systematic development of current market values of similar assets prepared by the client.
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d. All of the above.
Question 8
Question
For intangible assets, controls should be designed to do which of the following?
Answer
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a. Identify and account for intangible asset impairments.
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b. Develop amortization schedules that reflect the remaining useful life of patents or copyrights associated with the asset.
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c. Provide reasonable assurance that decisions are appropriately made as to when to capitalize or expense research and development expenditures.
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d. All of the above.
Question 9
Question
Which of the following information should be included in management’s documentation regarding intangible assets?
Answer
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a. Manner of acquisition.
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b. Basis for the capitalized amount
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c. Expected period of benefit.
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d. All the above should be included.
Question 10
Question
When performing preliminary analytical procedures related to long-lived assets, which of the following should the auditor compare the unaudited financial statements with?
Answer
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a. Past results.
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b. Industry trends.
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c. Future company projections.
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d. Both A and B.
Question 11
Question
An auditor’s review of the repair expense to identify any capital expenditures is a test related to which management assertion?
Answer
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a. Valuation.
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b. Rights and obligations.
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c. Existence.
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d. Completion.
Question 12
Question
Audit procedures should be proportional to which of the following?
Answer
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a. The assessed risks.
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b. Size of the client.
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c. Size of the firm.
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d. The assessed misstatements.
Question 13
Question
Which is the primary assertion tested in conjunction with obtaining evidence regarding impairment?
Answer
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a. Rights.
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b. Cutoff.
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c. Existence.
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d. Valuation.
Question 14
Question
If the auditor is testing the reasonableness of depreciation expense for the year, which assertion is being tested?
Answer
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a. Valuation.
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b. Existence.
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c. Completeness.
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d. Rights and obligations.
Question 15
Question
In a tour of a client's manufacturing facility, the auditor is most likely attempting to satisfy which of the following management assertions related to long-lived assets?
Answer
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a. Presentation and disclosure.
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b. Existence.
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c. Rights.
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d. Completeness.
Question 16
Question
The auditor selects a sample of asset disposals and examines the sales documentation evidencing disposal of the equipment and recomputes gain or loss on the disposal. This audit procedure primarily tests which of the following assertions for the equipment account?
Answer
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a. Presentation and disclosure.
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b. Valuation.
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c. Rights.
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d. Existence.
Question 17
Question
Which one of the following does not constitute a probable relationship between accounts?
Answer
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a. Oil reserves and depreciation.
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b. Equipment and depreciation.
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c. Assets under capital leases and amortization.
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d. Patent and amortization.
Question 18
Question
A client has implemented a policy requiring the establishment and enforcement of property management training for all personnel involved in the use, stewardship, and management of equipment. Which of the following is not a test that could be used in testing the control?
Answer
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a. Inquiry.
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b. Inspection of documentation.
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c. Review of financial statements.
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d. Observation.
Question 19
Question
The auditor performs substantive procedures related to property, plant, and equipment to determine if the assets have been pledged as collateral or title has transferred. What is the primary assertion the auditor is testing?
Answer
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a. Completeness.
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b. Valuation.
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c. Rights.
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d. Existence.
Question 20
Question
Which of the following assertions are usually the two most relevant assertions related to long-lived assets?
Answer
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a. Valuation and completeness.
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b. Existence and presentation.
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c. Completeness and existence.
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d. Existence and valuation.
Question 21
Question
Which of the following procedures is not a procedure used by an auditor in searching for unrecorded disposals of long-lived assets?
Answer
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a. Send confirmations to insurance agents.
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b. Examine property tax records.
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c. Make client inquiries.
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d. Examine scrap sales accounts.
Question 22
Question
As natural resources are used up, the client has to recognize which of the following types of expense?
Answer
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a. Amortization expense.
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b. Depletion expense.
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c. Reclamation expense.
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d. Depreciation expense.
Question 23
Question
Which of the following is not a typical internal control over long-lived assets?
Answer
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a. Periodically reassess the appropriateness of depletion categories.
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b. Periodically review management strategy and systematically assess the impairment of assets.
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c. Identify obsolete or scrapped equipment and write it down to scrap value.
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d. Reconcile physical asset inventory with the property ledger.
Question 24
Question
Which of the following procedures is not a fraud-related audit procedure used to respond to identified fraud risk factors?
Answer
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a. Confirm the terms of significant additions of property or intangibles with other parties involved in the transaction.
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b. Physically inspect tangible assets, including major additions, and agree serial numbers with invoices or other supporting documents.
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c. Use the work of a specialist for asset valuations, including impairments.
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d. All of the above are fraud-related audit procedures.
Question 25
Question
Which of the following is not a significant challenge related to valuation issues for audits of merger and acquisition transactions?
Answer
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a. Valuing the liabilities upon acquisition.
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b. Measuring the qualifications of personnel from the acquired company.
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c. Valuing the assets upon acquisition.
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d. Measuring restructuring charges.
Question 26
Question
Which of the following is false regarding the valuation of goodwill?
Answer
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a. U.S. accounting standards require that goodwill be specifically identified with an operating segment or a reporting unit.
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b. Goodwill is tested for impairment quarterly.
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c. Goodwill is the excess of the purchase price over the fair market value of the acquired company’s tangible assets, identifiable intangible assets, and liabilities.
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d. By definition, acquired parts of the business (or goodwill) must be sufficiently identifiable so that they can be managed as a unit or may be separately identified and sold as a unit.
Question 27
Question
Which of the following approaches for determining fair value of Level 3 assets is used by the auditor?
Answer
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a. Performing an analysis of volume of trading activity.
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b. Determining appropriate model and sensitivity of model.
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c. Performing an analysis of trades on similar assets.
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d. Reviewing contracts to determine if loss is other than temporary.
Question 28
Question
In the audit approach for assessing fair value, which should the auditor determine for Level 2 assets?
Answer
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a. Contingent liabilities.
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b. Sensitivity of model used for marking to model.
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c. The correspondence of the client’s assets to similar assets in an active market.
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d. The performance of tests of controls.
Question 29
Question
The FASB has set a hierarchy of inputs to consider in assessing fair value. Which of the following relates to Level 3?
Answer
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a. Unobservable inputs to be used in situations where markets do not exist.
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b. Quoted prices for identical items in active, liquid, and visible markets.
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c. Observable information for similar items in active or inactive markets.
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d. Unobservable inputs to be used in illiquid situations.
Question 30
Question
The FASB has set a hierarchy of inputs to consider in assessing fair value. Which of the following valuations are generally viewed as the most subjective?
Answer
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a. Level 0.
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b. Level 2.
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c. Level 3.
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d. Level 1.
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