Which of the Following Statements About the Audit of Fixed

question 110

Multiple Choice

Which of the following statements about the audit of fixed assets is the least correct?

• A) The primary accounting record for manufacturing equipment and other property, plant and equipment is generally a fixed asset master file.
• B) Manufacturing equipment and current assets are normally audited in the same fashion regardless of the activity within a particular account.
• C) The emphasis on auditing fixed assets is on verification of current-period acquisitions.
• D) Failure to record the acquisition of a fixed asset affects the income statement until the assets are fully depreciated.

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Definitions:

Finished Goods

Finished goods are products that have completed the manufacturing process and are ready to be sold to customers.

Overhead

Overhead refers to ongoing business expenses that are not directly tied to producing a specific product or service, such as rent, utilities, and administrative costs.

Underapplied

A situation where the allocated indirect costs are less than the actual indirect costs incurred.

Overapplied

A situation where the overhead costs applied to products or services exceed the actual overhead costs incurred.