If the Auditor Is Testing the Reasonableness of Depreciation Expense

question 23

Multiple Choice

If the auditor is testing the reasonableness of depreciation expense for the year, which assertion is being tested?

• A) Completeness.
• B) Rights and Obligations.
• C) Existence.
• D) Valuation

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Definitions:

Ordinary Income

Income earned from providing services or the sale of goods, as opposed to capital gains or investment income, taxed at standard rates.

Section 179 Expense

A tax deduction that allows businesses to deduct the full purchase price of qualifying equipment and/or software within a tax year.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, reflecting wear and tear, decay, or decline in value.

Distribution

The payment of assets from a fund or account to its beneficiaries or shareholders, such as dividends or withdrawals.