SEATWORK NO.
Question
1.) The auditors' approach to
the audit of property, plant and
equipment largely results from
the fact that relatively few
transactions occur.
2.) A major control procedure
related to plant and equipment
is a budget for depreciation.
4.) The auditors typically
observe all major items of
property, plant and equipment
every year.
Answer NARRATIVE (Bakit ka nagkamali?) RECOMMENDATION
TRUE I was wrong because I thought it Read the statement carefully
was not a result of just a few and consider the words "few"
transactions. (Aguado) because most statements
mislead the reader but above
My understanding to the approach all, don't overthink.
of an auditor in auditing PPE is
not just largely in few transactions
but "all." (Alcantara)
I thought that the approach on the
audit of PPE results on not just a
few transaction. (Cajanding)
FALSE When auditing PPE, the one that Analyze the statement if the
we really check is if the message makes sense or the
depreciation is properly allocated procedure really exists like
that's why I thought this should be budget for depreciation.
the one that needs the major
control procedure (Alcantara)
Since depreciation is always
associated to PPE, I thought there
is certain control procedure
related to that such as budget
(Vargas) (Aguado)
FALSE I thought they should observe all In an audit of PPE, be in a POV
property, plant and equipment of an auditor and consider the
and not just the major ones. words like "all" or "every year"
(Cajanding) (Aguado) that will make the statement
wrong.
I didn't notice the term "every
year" (Vargas)
7.) The primary purpose of
internal control over plant and
equipment is to safeguard the
assets from
theft.
8.) A typical procedure in the
audit of property is examination
of public records to verify the
ownership of the property.
FALSE Since plant and equipment is Analyze the statement if the
prone to theft, I thought the message makes sense or the
internal control on it would be a procedure really exists like
primary purpose where in fact, it safeguarding the assets from
is not. (Alcantara) theft where it will also be
misleading but since it stated
I thought safeguarding of assets is that "primary", then this is not
one of the primary purpose of the the major control.
internal controls. (Cajanding)
FALSE I actually answered correctly but I Analyze the statement carefully
overthink it so I changed my and consider the subject of the
answer. Anyways, I became sentence that gives emphasis
confused when examining of like "public records" and if this
public records in verification of corresponds to the supporting
ownership. It is false because we information.
don't examine public records, just
the title or the deeds. (Alcantara)
I got confused on how the
ownership is going to be verified
and believed that examination of
public records is one of the
procedures. (Cajanding) (Aguado)
I misinterpreted the statement, I
thought examination of public
records was synonymous to deeds
and title. (Vargas)
9.) Even when internal control is
weak, a significant portion of
the audit work on property,
plant and equipment may be
performed at an interim date.
10.) In the audit of depletion
the auditors must often rely on
the work of specialists.
11.) An auditor has identified
numerous debits to
accumulated depreciation of
equipment. Which of the
following is most likely?
12.) In testing for unrecorded
retirements of equipment, an
auditor might.
TRUE The audit work on PPE I thought Mostly, the statements that is in
is not performed at an interim good construction when you
date but at the end of the period. read is correct, but still, you
(Alcantara) need to consider other facts
I thought it couldn't be done if the and your knowledge about
internal control is weak. (Aguado) audit work on property, plant,
and equipment.
I got confused with the term
"significant portion", I thought the
statement was wrong since there
is no specific quantification for
that term. (Vargas)
TRUE I was thinking that they should do Consider the facts and the
it independently and not rely on concepts in auditing of PPE like
specialists. (Cajanding) this, depletion where it should
rely on specialists since this is
about mineral resources,
exploration, wasting asset, etc.
B. Plant assets were I thought that if there are Read the question carefully
retired during the year. numerous debits to accumulated because there is a question
depreciation of equipment is that about "least likely" , "most
the prior year's depreciation likely." Then, eliminate other
expense was erroneously choices that is irrelevant and
understated. (Aguado) make some real-life situations
that will help you to get a
I misread the statement, I thought correct answer.
it was overstated so in order to
correct that accumulated
depreciation must be debited.
(Vargas)
A. Select items of I answered it wrong because I Understand the concept more
equipment from the understood it in opposite to the and know the difference
accounting records and right answer where tracing of between selecting and tracing.
then attempt to locate equipment during the plant tour
them during the plant to its subsidiary ledger.
tour. (Alcantara) (Aguado)
13.) A plant manager would be
most likely to provide
information on which of the
following?
14.) Which of the following
would be least likely to address
control over the initiation and
execution of equipment
transactions?
15.) When there are numerous
property and equipment
transactions during the year, an
auditor who plans to assess
control risk at a low level
usually performs:
C. Existence of obsolete I thought a plant manager would
inventory. provide information about the
physical inventory valuation
techniques. (Alcantara)
D. Procedures exist to In addressing the control, I
restrict access to thought it is least likely to
equipment requests for consideration of
soliciting competitive bids than
the restrict access to equipment
because this control is more likely
to be priority in authorization.
(Alcantara)
I thought that it would be least
likely to be address through
prenumbering purchase orders
that were used for equipment and
periodically accounting it.
(Aguado)
Since the question is about least
likely, I thought major repairs
don't need approval of highr level.
(Vargas)
C. Tests of controls and I compared here the extensive test
limited tests of current and limited test and since it is a
year property and low level control risk, extensive
equipment transactions. test is not being performed.
(Alcantara) (Aguado)
I thought assessing at low level
don't need tests just analytical
procedures. (Vargas)
The question is about "most
likely" so the other options can
also provide information but
choose the one that really has
the best above all, the priority
than others.
The rest of the options are very
likely to address control over
the initiation and execution of
equipment transactions unlike
option D which only shows who
has access to equipment.
An auditor who plans to assess
control risk at low level
performs a combination of tests
of controls and limited tests of
current year PPE transactions
which involve evaluating
effectiveness of client’s internal
controls.
16.) Which of the following best
describes the auditors'
approach to the audit of the
ending balance of property,
plant and equipment for a
continuing non-public client?
17.) Which of the following is
not a control that should be
established for purchases of
equipment?
B. Agreement of the I also thought that only those
beginning balance to changes in the accounts will be
prior year's working relevant in auditing the ending
papers and audit of balance of PPE. (Alcantara)
significant changes in
the accounts. The question is about continuing
client, I thought direct audit of
balances is the proper approach
because you also audited them
last period. (Vargas)
B. Requiring that the I incorrectly answered this
department in need of because I chose the one that is
the equipment order the requiring the accounting policy
equipment. regarding the minimum dollar
amount of purchase for
capitalization as not a control
where this is still a control for the
equipment. (Alcantara) (Aguado)
With option B, auditors usually
start by comparing the
beginning balances of PPE and
the prior year’s which help
them validate the accuracy of
the amount for the next year.
Since we are looking for the
option which is not a control,
we should check that the other
options mentioned in the
problem are all controls that
should be established in
purchasing equipment.

I didn't consider the fact that

purchase of equipment can have
foreign transactions so I thought
dollar considerations ain't needed.
(Vargas)
19.) Which of the following is B. Examination of rent I thought the title policy would
the best evidence of continuous receipts from lessees of provide an evidence for
ownership of property? the property. continuous ownership of property
but I also thought that the rent
receipts since this is to be received
monthly, this is to be considered
as the best evidence than the
former. (Alcantara)
All of the choices mentioned
can be an evidence for the
continuous ownership of
property but as auditor’s we
would know that there would
be a best choice and that would
be the rent receipts from the
lessees.

I thought that examining the

deeds would be the besst evidence
of continous ownership of
property. (Aguado)

Since the question was about

property, I thought it can be best
traced through title policy.
(Vargas)

I thought the deed is the one

useful as evidence for ownership.
(Cajanding)
20.) Which of the following best
describes the auditors' typical
observation of plant and
equipment?
D. The auditors observe I overthink it to the choice (b) as I The one that describes an
major additions to plant thought if only those major auditor’s observation best on
and equipment made additions or all additions shoud PPE is the last option wherein
during the year. be observed in plant and we need to see the significant
equipment during the year or material additions through
(Alcantara) the year.

I thought that since we're talking

about PPE, auditor's typical
observation would be on its
physical inventory. (Aguado)

Since PPE is always associated

with hight cost, I thought I
thought all major items should be
observed. (Vargas)

I thought that everything should

21.) Which of the following is
used to obtain evidence that the maintenance expense
client's equipment accounts are
not understated?
be observed and not just the
major additions. (Cajanding)
A. Analyzing repairs and Since the depreciation
expense/accumulated
depreciation is a contra-account
of an equipment, their
relationship would be of
understatement that's why
recomputing it would be of good
evidence but it's wrong.
(Alcantara) (Cajanding)
By analyzing the repairs and
maintenance expense accounts
we are most likely to see if
there are changes through the
year that were expensed
instead of capitalizing which
causes understatement.

I thought that it could be obtain if

you start with the financial
statements and trace the
transaction details to the source
document. (Aguado) (Vargas)
22.) Which of the following is
not a test primarily used to test
property, plant and equipment
accounts for overstatement?
D. Vouching retirements The review of property tax bills
of plant and equipment. misled me as not a test for
overstatement. (Alcantara)
I thought Investigation of
reductions in insurance coverage
wouldn't detect overstatement but
understatement because of the
word reduction. (Aguado)
By reading the choices, you
would know that the first three
are tests primarily used for
overstated balances on PPE and
that vouching retirements
would not be one of them.

I thought insurance coverage wass

irrelevant in tests for
overstatement because some PPE
have different date of acquisition
and date of insurance. (Vargas)

I thought that investigation

regarding the insurance coverage
would not be significant on testing
accounts for overstatement.
(Cajanding)
23.) A continuing audit client's A. More audit time.
property, plant and equipment
and accounts receivable
accounts have approximately
the same year-end balance. In
this circumstance, when
compared to property, plant and
equipment one would normally
expect the audit of accounts
receivable to require:
24.) When comparing an initial D. Property, plant and
audit with a subsequent year
audit for a particular client, the
scope of audit procedures for
which of the following accounts
would be expected to decrease
the most?
I thought auditing AR is requiring Given same year-end balance
similar procedure to PPE. would give confusion to the
(Alcantara) auditor wherein they would
have todo confirmation on the
I think I comprehended the accounts receivable which leads
question wrong and thought that to requiring more audit time.
since they have the same balance
it would consume less audit time.
(Cajanding)
I thought AR would require less
audit time and PPE more audit
time. (Aguado)
I thought similar confirmation
procedures should be done
regardless of whether the client is
a continuing client or not.
(Vargas)
I answered here accounts The PPE are most likely to
equipment. receivable since it is also high in decrease because they
risk that is to decrease but since depreciate while the rest
our audit topic is ppe, then I think depends on the transactions
the focus is PPE not AR. that happen through the year.
(Alcantara)
25.) When performing an audit
of the property, plant and
equipment accounts, an auditor
should expect which of the
following to be most likely to
indicate a departure from
generally accepted accounting
principles?
A. Repairs have been An audit of PPE I thought should On generally accepted
capitalized to repair also be concerned in capitalization accounting principles, it is
equipment that had of its cost like freight in but the stated that we treat repairs and
broken down. correct one it is also should focus maintenance as an expense and
in repairs and maintenance. not capitalized on the asset.
(Alcantara)
I thought that the assets have
been acquired from affiliated
corporations with the related
transactions recorded and
described in the financial
statements would most likely
indicate a departure from
generally accepted accounting
principles. (Aguado)
I thought different accounting
principle was more appropriate
for affliated corporations. Like
there is a different accounting
standard that negates from the
standard in PPE. (Vargas)