PRACTICE SET – AUDIT OF PPE

1. Analysis of which account is least likely to reveal

Depreciation Expense
evidence relating to recorded retirement of 250
equipment?
200
a. Accumulated depreciation 150
b. Insurance expense
c. Property, plant, and equipment 100
d. Purchase returns and allowances 50
2. Which of the following best describes the auditors’ 0
approach to the audit of the ending balance of 2020 2021 2022 2023 2024
property, plant and equipment for a continuing
nonpublic client?

a. Agreement of the beginning balance to prior

year’s working papers and audit of significant
changes in the accounts
b. Direct audit of the ending balance
c. Audit of selected purchases and retirements for
the last few years
d. Audit of changes in the accounts since inception
of the company

3. Which if the following is not a control that should be

established for purchases of equipment?

a. Establishing a budget for capital acquisitions

b. Requiring that the receiving department receive
the equipment
c. Requiring that the department in need of the
equipment order the equipment
d. Establishing an accounting policy regarding the
minimum dollar amount of purchase that will be
considered for capitalization

4. For which of the following ledger accounts would the

auditor be most likely to analyze the details to
identify understatements of equipment
acquisitions?

a. Service revenue
b. Sales
c. Repairs and maintenance expense
d. Sales salaries expense

5. Which of the following explanations most likely

would satisfy an auditor who questions
management about significant debits to the
accumulated depreciation accounts?

a. The estimated remaining useful lives of plant

assets were revised upward.
b. Overhead allocations were revised at year-end
c. The prior year’s depreciation expense was
erroneously understated
d. Plant assets were retired during the year

6. PPE balance did not decrease as expected and the

volume of additions made to the PPE is the same as
last year. What contributed to the minimal reduction
in PPE?

7. Identify the depreciation method used in the line

chart below:

Blue:
Orange:
Gray: