PPE

Question 1

best way to test PPE

Answer 1

verify each transaction

Question 2

TRICK:

FA workpaper

Answer 2

includes expense and asset on same WP

Question 3

Extraordinary repairs on assets lead to

Answer 3

debits to accumulated depreciation

Question 4

depreciation expense assertion

Answer 4

classification and understanding

valuation and allocation

Question 5

exception:

unrecorded retirements

Answer 5

TEST LIKE EXISTENCE ASSERTION

Question 6

LIENS ON PPE RECORD ISSUE

Answer 6

LIENHOLDER IS INSURANCE BENEFICIARY THEREFORE HOLDS THE DOCUMENTATION FOR INSURANCE POLICY

Question 7

change is estimate

Answer 7

PROSPECTIVE

Question 8

HOW TO RETIRE PLANT ASSETS

Answer 8

DEBIT ACCUMULATED DEP

CREDIT ASSETS

Question 9

investment TRANSFERS between CATEGORIES

Answer 9

valuation & classification

Question 10

EQUITY METHOD OWNERSHIP AUDITOR RELIES ON

Answer 10

INVESTEES FS

Question 11

DERIVATIVES

Answer 11

Auditor verifies applicable framework

Question 12

completeness derivatives

Answer 12

confirm with outside party whether or not side agreements have been made

Question 13

notes or accounts receiavble

Answer 13

CONFIRMATION IS NOT NECESSARY BECAUSE IT DOESN’T ESTABLISH CONDUCTIBILITY

Question 14

DERIVATIVES IMPAIRMENT LOSS

Answer 14

YES

Question 15

AUDIT PLAN FOR INVESTMENTS

Answer 15

ANALYTICAL

RECOMPUTE INTEREST AND DIVIDENDS

Question 16

securities verified at subsequent date

Answer 16

must be sealed off because of the threat that they maybe used to cover cash shortage

Question 17

debenatures

Answer 17

bonds backed by general credit of issuer

Trustee carries out all bond activities

Question 18

noncurrent debt

current debt

auditor responsibility

Answer 18

1 -(1) determines that all noncurrent debt has been recorded and constitutes bona fide liabilities;
(2) verifies that federal and state laws relevant to financial reporting have been complied with;
(3) determines that premium, discount, interest payable, and interest expense are accurately recorded;
(4) monitors compliance with debt contracts; and
(5) reviews proper presentation and disclosure in the financial statements.
6 -examining bond trust indentures (contracts)

Current must have a lawyers opinion

Question 19

balloon payment

Answer 19

applies to a subsequent year

Question 20

private placement

issues related to

Answer 20

no bond trustee

issues with receiving and recordance

Question 21

auditor verifies affiliates indebtedness by

Answer 21

board minutes and management rep letter

Question 22

issuance of bonds can be authorize through

Answer 22

board minutes because it provides the maximum amount of indebtness a company is willing to have

if the trustee versus minutes is a decision ALWAYS GO WITH MINUTES FOR AUTHORIZATION

Question 23

LEAST AMT OF AUDIT TIME

Answer 23

OWNERS EQUITY SECTION

Question 24

HOW TO AUDIT RE

Answer 24

VERIFICATION FOR AUTHORIZED DIV

Question 25

EMPHASIS FOR RE

Answer 25

BOARD MUST APPROVE CAPITAL TRANSACTIONS SUCH AS STOCK AND DIVIDENDS

Question 26

DIVIDEND PAYMENT TO STOCKHOLDERS AT

Answer 26

RECORD DATE

Question 27

CAPITAL STOCK TEST NOT NEEDED

Answer 27

DETAIL TESTING B/C
1 - DIVIDENDS ARE USUALLY IN SMALL AMOUNTS
2 - INDEPENDENT FINANCIAL INST. ISSUES THE DIVIDENDS

Question 28

how are manufacturing costs expensed

Answer 28

direct labor goes to WIP

Therefore payroll expense for hours is sent to INVENTORY

Question 29

VALUATION AND ALLOCATION INVESTMENT

Answer 29

SUB FINANCIAL STATEMENTS

Question 30

EQUITY TRACING CLOSING BAL ASSERTION

Answer 30

VALUATION/ALLOCATION