Identify three asset accounts, three expense accounts, and three liability accounts typically associated with acquisition and payment cycle transactions.
19-2 (OBJECTIVE 19-2) Explain the relationship between substantive tests of transactions for the acquisition and payment cycle and tests of details of balances for the verification of property, plant, and equipment. Which aspects of property, plant, and equipment are directly affected by the tests of controls and substantive tests of transactions and which are not?
19-3 (OBJECTIVE 19-2) What is the relationship between the audit of property, plant, and equipment accounts and the audit of repair and maintenance accounts? Explain how the auditor organizes the audit to take this relationship into consideration.
19-4 (OBJECTIVE 19-2) List and briefly explain the purpose of all audit procedures that might reasonably be applied by an auditor to determine that all property, plant, and equipment retirements have been recorded in the accounting system.
19-5 (OBJECTIVE 19-2) Explain why asset impairments are difficult to identify and audit.
How might a client or auditor use a valuation specialist in determining the fair value of
property and equipment?
19-6 (OBJECTIVE 19-2) Describe factors the auditor should consider in developing an expectation for depreciation while performing a substantive analytical procedure for depreciation expense.
19-7 (OBJECTIVE 19-3) Explain the relationship between substantive tests of transactions for the acquisition and payment cycle and tests of details of balances for the verification of prepaid insurance.
19-8 (OBJECTIVE 19-3) Explain why the audit of prepaid insurance should ordinarily take a relatively small amount of audit time if the client’s assessed control risk for acquisitions is low.
19-9 (OBJECTIVE 19-3) What are the major differences between the audit of prepaid expenses and other asset accounts such as accounts receivable or property, plant, and equipment?
19-10 (OBJECTIVE 19-4) Explain the relationship between accrued rent and substantive tests of transactions for the acquisition and payment cycle. Which aspects of accrued rent are not verified as part of the substantive tests of transactions?
