For each analytical procedure listed below, identify a potential misstatement in the property management accounts it...

For each analytical procedure listed below, identify a potential misstatement in the property management accounts it could help find.

A. Compute the ratio of depreciation expense to the related property, plant , and equipment accounts and compare to prior years’ ratio

B. Compare monthly or annual repairs and maintenance with previous years.

C. Compute ratio of insurance expense to the related property, plant, and equipment accounts and compare to prior years’ ratios.

Expert Solution

A. Computing the depreciation to the PPE account balance will give us the average rate of depreciation for that particular category of PPE and, and comparing it to the previous year figures will help in identifying a potential mistake in the calculation and the recording of depreciation for each category of PPE. On the identification of unreasonable fluctuations in the depreciation rates, the reason for the same can be identified (say, a change in the rate of depreciation or change in method of depreciation). The reason may also be a miscalculation of depreciation and this can also be identified easily.

B. Calculating the monthly and annual repairs to the previous year figures will give us a trend analysis of the said expenses. By undertaking this exercise, we can identify any unreasonable spikes in the expense, which may be due to any capital expense misstated as a revenue expense or an erroneous booking of an unrelated expense if there is a monthly/annual repairs contract with fixed payments.

C. Computing the ratio of insurance expense to the related PPE will help in determining if the insurance premium cost has increased or decreased over the year. A potential misstatement that may be identified is the erroneous recording of expense under the wrong head or recording of insurance premium of one property against another i.e. a mismatch of the property and the insurance recorded against it.It will help us identify an unreasonable expense for the insurance of the property.

ekkarill92 answered 2 years ago

Several specific audit procedures are listed below. For each item, identify the type of procedure listed...

Several specific audit procedures are listed below. For each item, identify the type of procedure listed and which of the assertions is being addressed by the procedure. (a) Examine a list of investment securities held by the client’s trustee. (b) For a sample of transactions posted to the client’s accounts payable subsidiary ledger, examine supporting purchase orders and receiving reports agreeing amounts and information. (c) Send a written request to the client’s customer for verification of the amount owed to...

1) Which of the following analytical procedures would not provide information on a potential misstatement( either...

1) Which of the following analytical procedures would not provide information on a potential misstatement( either understatement or overstatement) of the allowance for uncollectible accounts? a- compare allowance for uncollectible accounts as a percentage of accounts receivable with previous years b- compare aging categories as a percentage of accounts receivable with previous years c- compare current year gross margin percentage with previous year gross margin d- compare number of days accounts receivable are outstanding with previous years 2) An appropriate...

1 A.Mention some misstatement of fraud risk in revenue cycle! B.Mention some analytical procedure ratio related...

1 A.Mention some misstatement of fraud risk in revenue cycle! B.Mention some analytical procedure ratio related to inventory and payment cycle! C.Why cash is considered as high inherent risk? D.What is the different between disposal and impairment of non current (fixed) asset? E.Mention some test of control regarding inventory and payment cycle! F.Provide example of each management fraud and employee fraud regarding cash account!

Potential Audit Procedure Failures. For each of the general audit procedures of; Recalculation, Observation, Confirmation (accounts...

Potential Audit Procedure Failures. For each of the general audit procedures of; Recalculation, Observation, Confirmation (accounts receivable, securities or other assets), Injuiry, Inspection of internal domuments, reperformance and analystical procedures. Discuss one way the procedure can be misapplied or the auditors could be misled in such a way to render the work (audit evidence) misleading or irrelevent. Give examples

have listed two audit procedures. For each procedure, say: Which of the various management assertions the...

have listed two audit procedures. For each procedure, say: Which of the various management assertions the test most directly addresses. (If you believe the test equally addresses more than one assertion, say why. Don't list four or five assertions - I'll assume you can't tell which is which.....) How does this test address that assertion? (You need to address BOTH procedures for a full answer) Inventory Procedure #1 - The auditor obtains a copy of the year-end inventory listing. For...

Which of the following is a substantive analytical procedure? 1. Foot the accounts payable trial balance...

Which of the following is a substantive analytical procedure? 1. Foot the accounts payable trial balance and compare with the general ledger. 2. Confirm accounts payable balances directly with vendors. 3. Multiply the commission rate by total sales and compare the results with commission expense. 4. Compute inventory turnover for each major product line and compare with industry standards. Group of answer choices All of the above are substantive analytical procedures Item 4 only Items 3 and 4 Item 3...

Listed below is a group of temporary differences. For each item, identify if it leads to...

Listed below is a group of temporary differences. For each item, identify if it leads to a deferred tax asset (DTA) or a deferred tax liability (DTL). 1. Accrued of a loss contingency; tax deductible when paid. 2. Prepaid rent; tax deductible when paid 3. Warranty expenses estimated for financial reporting purposes; deductible for tax purposes when paid 4. Unrealized loss from recording investments at fair value; tax deductible when investments are sold 5. Advance rent receipts on an operating...

For each of the items listed below, identify the proper placement in the income statement or...

For each of the items listed below, identify the proper placement in the income statement or retained earnings statement under U.S. GAAP. (Income from continuing operations; Discontinued operations; Extraordinary items; Accounting principle changes) 1. Change to the FIFO method from LIFO method: effect as of the beginning of the year. 2. Settlement of material litigation. 3. Prohibition of product line by the government. 4. Material gain on the sale of a factory building. 5. Change from double- declining balance to...

Consider the market for minivans. For each of the events listed below: → identify which of...

Consider the market for minivans. For each of the events listed below: → identify which of the determinants of supply are affected → indicate whether supply increases or decreases → draw a diagram to show the effect on the supply curve. (Make sure to label the axes.) a. (0.5 pt) A strike by steelworkers raises steel prices. b. (0.5 pt) Engineers develop new automated machinery for the production of minivans Please draw the graph as well

I have listed two audit procedures. For each procedure, say: Which of the various management assertions...

I have listed two audit procedures. For each procedure, say: Which of the various management assertions the test most directly addresses. (If you believe the test equally addresses more than one assertion, say why. Don’t list four or five assertions – I’ll assume you can’t tell which is which…..) How does this test address that assertion? (You need to address BOTH procedures for a full answer) Inventory Procedure #1 – The auditor obtains a copy of the year-end inventory listing....

Question