When Testing Fixed Assets for the Reasonableness of the Client's

question 59

Multiple Choice

When testing fixed assets for the reasonableness of the client's estimated useful lives,the audit team should do which of the following?

• A)consult the IRS code for regulated lives.
• B)make the decision for the client upon purchase.
• C)understand the economics of the client's business.
• D)compare them with other clients in different industries.

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Definitions:

Physical Deterioration

The gradual loss of an asset's functional utility or value due to wear and tear or aging.

Material Wastage

The unwanted or unusable materials produced during a manufacturing or consumption process. It reflects inefficiency and can impact operational costs.

Selling Costs

Expenses associated with promoting and selling a company's products or services.

Net Purchases

The total cost of purchases in a period minus purchase returns, allowances, and discounts.