Audit of Ppe

AUDIT OF PPE
Select the best answer for each of the following:
1. Which of the following questions would an auditor least likely include on an internal control
questionnaire concerning the initiation and execution of equipment transactions?
a. Are procedures in place to monitor and properly restrict access to equipment?
b. Are requests for major repairs approved at a higher level than the department initiating the
request?
c. Are prenumbered purchase orders used for equipment and periodically accounted for?
d. Are requests for purchases of equipment reviewed for consideration of soliciting competitive
bids?
2. Property acquisitions that are misclassified as maintenance expense would most likely be
detected by internal control procedures that provide for
a. Review and approval of the monthly depreciation entry by the plant supervisor.
b. Investigation of variances within a formal budgeting system.
c. Examination by the internal auditor of vendor invoices and canceled checks for property
acquisitions.
d. Segregation of duties of employees in the accounts payable department.
3. A weakness in internal accounting control over recording retirements of equipment may cause
the auditor to
a. Trace additions to the "other assets" account to search for equipment that is still on hand
but no longer being used.
b. Inspect certain items of equipment in the plant and trace those items to the accounting
records.
c. Select certain items of equipment from the accounting records and locate them in the plant.
d. Review the subsidiary ledger to ascertain whether depreciation was taken on each item of
equipment during the year.
4. The most significant audit step in substantiating additions to the office furniture account
balance is
a. Comparison to prior year's acquisitions.
b. Examination of vendors' invoices and receiving reports for current year's acquisitions.
c. Review of transactions near the balance sheet date for proper period cutoff.
d. Calculation of ratio of depreciation expense to gross office equipment cost.
5. An auditor is verifying the existence of newly acquired fixed assets recorded in the accounting
records. Which of the following is the best evidence to help achieve this objective?
a. Oral evidence obtained by discussions with operating management.
b. Documentary support obtained by vouching entries to subsidiary records and invoices.
c. Documentary support obtained by reviewing titles and tax returns.
d. Physical examination of a sample of newly recorded fixed assets.
6. In auditing plant assets and accumulated depreciation for proper valuation, the auditor should
do all except the following:
a. Physically inspect major plant assets additions.
b. Recalculate depreciation expense on a test basis.
c. Vouch repairs and maintenance expense on a test basis.
d. Vouch major additions by reference to underlying documentation.
7. To verify the proper value of costs charged to real property records for improvements to the
property, the best source of evidence would be:
a. A letter signed by the real property manager asserting the propriety of costs incurred.
b. Original invoices supporting entries into the accounting records.
c. A comparison of billed amounts to contract estimates.
d. Inspection by the auditor of real property improvements.
8. To test the accuracy of the current year's depreciation charges, an auditor should rely most
heavily on
a. Comparison of depreciation schedule detail with schedules supporting the income tax
return.
b. Re-computation of depreciation for a sample of plant assets.
c. Tracing of totals from the depreciation schedule to properly approved journal entries and
ledger postings.
d. Vouching of the current year's fixed asset acquisitions.
9. The audit procedure of analyzing the repairs and maintenance accounts is primarily designed to
provide evidence in support of the audit proposition that all
a. Capital expenditures have been properly authorized.
b. Expenditures for fixed assets have been recorded in the proper period.
c. Expenditures for fixed assets have been capitalized.
d. Non-capitalizable expenditures have been properly expensed.
10. Assets may suffer an impairment in value for a variety of reasons, but not likely as a result of:
a. A corporate restructuring.
b. Slumping demand for uncompetitive products.
c. Significant increases in market share.
d. Obsolescence.

Audit of Ppe

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AUDIT OF PPE

Select the best answer for each of the following:

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