LQ_Audit of Investment, PPE and Intangible Assets

Which of the following controls would an entity most likely use to assist in satisfying the completeness assertion related to long-term investments?

• The controller compares the current market prices of recorded investments with the brokers' advices on file

• Senior management verifies that securities in the bank safe deposit box are registered in the entity's name

• The internal auditor compares the securities in the bank safe deposit box with recorded investments

• The treasurer vouches the acquisition of securities by comparing brokers' advices with cancelled checks

When negotiable securities are of considerable volume, planning by the auditor is necessary to guard against

• Substitution of securities already counted for other securities which should be on hand but are not

• Substitution of authentic securities with counterfeit securities

• Unauthorized negotiation of the securities before they are counted

• Unrecorded sales of securities after they are counted

In auditing investments for proper valuation, the auditor should do all but the following

• Vouch purchases and sales of securities by tracing to brokers' advices and cancelled checks

• Compare cost and market by reference to year end market values for selected securities

• Confirm securities held in safekeeping off the client's premises

• Recalculate gain or loss on disposals

Of the following, which is the most efficient audit procedure for testing accrued interest earned on bond investments?

• Vouching the receipt and deposit of interest checks

• Recomputing interest earned

• Confirming interest rate with the issuer of the bonds

• Tracing interest declarations to an independent record book

When few property and equipment transactions occur during the year the continuing auditor usually obtains and understanding of internal control and performs

• Analytical procedures to verify current year additions to property and equipment

• A thorough examination of the balances at the beginning of the year

• Extensive tests of current year property and equipment transactions

• Tests of controls

Property, plant and equipment is typically judged to be one of the accounts least susceptible to fraud because

• The inherent risk is usually low

• The amounts recorded on the balance sheet for most companies are immaterial

• The depreciated values are always smaller than cost

• Internal control is inherently effective regarding this account

Which of the following combinations of procedures is an auditor most likely to perform to obtain evidence about fixed asset addition?

• Recomputing calculations and obtaining written management representations

• Observing operating activities and comparing balances to prior period balances

• Confirming ownership and corroborating transactions through inquiries of client personnel

• Inspecting documents and physically examining assets

When an auditor interviews the plant manager, he will most likely seek from the plant manager information regarding?

• Appropriateness of physical inventory observation procedures

• Deferral of procurement of certain necessary insurance coverage

• Adequacy of the provision for uncollectible accounts

• Existence of obsolete machinery

Additions to equipment are sometimes understated. Which of the following accounts would be reviewed by the auditor to gain reasonable assurance that additions are not understated?

• Repair and maintenance expense

• Accounts payable

• Gain on disposal of equipment

• Depreciation expense

Examining documentation of the purchase of intangible assets is consistent with the auditor's objective of validating the management's assertion of

• Completeness

• Existence

• Valuation

• Presentation and disclosure