ExpertMedium1 markMultiple Choice
CPA · Question 45 · Area III: Performing Procedures
An auditor is testing the 'Existence' of equipment. Which of the following procedures is MOST appropriate?
An auditor is testing the 'Existence' of equipment. Which of the following procedures is MOST appropriate?
Answer options:
A.
Select physically observed assets and trace them to the fixed asset sub-ledger.
B.
Select items from the fixed asset sub-ledger and physically inspect them.
C.
Review repair and maintenance expense accounts for capitalizable items.
D.
Recalculate depreciation expense.
How to approach this question
Directional Testing: Existence = Ledger -> Reality. Completeness = Reality -> Ledger.
Full Answer
B.Select items from the fixed asset sub-ledger and physically inspect them.✓ Correct
To test existence, the auditor selects from the accounting records (the sub-ledger) and vouches to the physical asset. The reverse direction tests completeness.
Common mistakes
Confusing the direction of testing (Vouching vs Tracing).
Practice the full CPA AUD Practice Exam 4
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