The following questions relate to audit procedures for property and equipment. Select the best response. 

a. In the examination of property, plant, and equipment, the auditor tries to determine all of the following except the 

1. Effectiveness of the internal control structure. 

2. Extent of property abandoned during the year. 

3. Adequacy of replacement funds. 

4. Reasonableness of the depreciation. 

b. In violation of company policy, Lowell Company erroneously capitalized the cost of painting its warehouse. The auditor examining Lowell's financial statements would most likely detect this when 

1. Discussing the capitalization policies with Lowell's controller. 

2. Examining maintenance expense accounts. 

3. Observing, during the physical inventory observation, that the warehouse had been painted. 

4. Examining the construction work orders supporting items capitalized during the year.

c. Which of the following auditing procedures would be least likely to lead the auditor to find unrecorded fixed asset disposals? 

1. Examination of insurance policies. 

2. Review of repairs and maintenance expense. 

3. Review of property tax files.

4. Scanning of invoices for fixed asset additions. 

d. Which of the following is the best evidence of real estate ownership at the balance sheet date? 

1. Title insurance policy. 

2. Original deed held in the client's safe. 

3. Paid real estate tax bills. 

4. Closing statement. 

e. The controller of Excello Manufacturing wants to use ratio analysis to identify the possible existence of idle equipment or the possibility that equipment has been disposed of without having been written off. Which of the following ratios would best accomplish this objective? 

1. Depreciation expense/book value of manufacturing equipment. 

2. Accumulated depreciation/book value of manufacturing equipment. 

3. Repairs and maintenance cost/direct labor costs. 4 Gross manufacturing equipment cost/units produced.