In the Audit of Property, Plant, and Equipment, Auditors Need

question 7

True/False

In the audit of property, plant, and equipment, auditors need to examine if the client has the right to record these assets as assets on the balance sheet. The auditor needs to examine any lease agreements associated with these assets to determine if the lease qualifies as a finance or an operating lease.

---

Definitions:

Depreciation Process

The systematic reduction in the recorded cost of a fixed asset over its useful life, reflecting its decrease in value over time.

Matching Principle

An accounting principle that dictates expenses should be recognized in the same period as the revenues they help to generate.

Market Value

The present rate at which a service or asset is available for purchase or sale in the marketplace.

Capitalized Interest

Interest expenditures included in the cost of a self-constructed asset