Course: Auditing and Assurance Services Seminar
Homework for Chapter 13
May 21, 2015
Property, Plant and Equipment: Depreciation and Depletion
13-2. The audit of plant and equipment requires mot as much time as the audit of current assets does since the number of transactions in current assets are larger than of plant and equipment; plant and equipment do not change much during the asset life; and only misstatement in current asset may affect the income and profit.
13-3. The objectives of internal control over property, plant, and equipment are to use the assets efficiently; to make sure the assets are safe; to keep records of property, plant, and equipment; and to assure that acquisitions and retirements are properly authorized.
13-4. Three elements of strong internal control for property, plant, and equipment:
A budget to forecast and control acquisitions and retirements of plant assets.
A reporting procedure assuring prompt disclosure and analysis of variances between authorized expenditures and actual costs.
A policy requiring all purchases of plant and equipment to be handled through the purchasing department and subjected to standard routines for receiving, inspection, and payment.
13-9. In the first audit of a company, depending on whether the company was audited by independent public accountants, the auditors can either use the beginning balances of plant and equipment in the past transactions; or make a complete historical analysis of the property account.
13-15. The principal objective of the auditors in analyzing a Maintenance and Repairs expense account is to disclose any capital expenditures that were erroneously recorded as expense.
13-18. The auditors must question the service lives adopted by the client for plant assets. If not then the auditors will not have