1. The auditors believe there is a significant risk of obsolescence of inventories for a particular client. Which of the following procedures would be least likely to detect obsolescence?

Performing analytical procedures. Using data analytics. Vouching purchases of inventory. Inquiries of production personnel.

2. Which of the following best describes the reason for the auditors' review of the client's cost accounting system?

To obtain evidence regarding the quantities of good described as work in process. To obtain evidence about the valuation of work in process, finished goods, and cost of goods sold. To obtain evidence about the profit margin on specific jobs. To obtain evidence about compliance with Cost Accounting Standards.

3. For which of the following ledger accounts would the auditor be most likely to analyze the details to identify understatements of equipment acquisitions?

Service Revenue. Sales. Repairs and maintenance expense. Sales salaries expense.

4. When performing an audit of the property, plant, and equipment accounts, an auditor should expect which of the following to be most likely to indicate a departure from generally accepted accounting principles?

Repairs have been capitalized to equipment to keep it in normal working order. Interest has been capitalized for self-constructed assets. Assets have been acquired from affiliated corporations with the related transactions recorded and described in the financial statements. The cost of freight-in on an acquisition has been capitalized.

5. In violation of company policy, Miller Company erroneously capitalized the cost of painting its warehouse. The auditors examining Miller's financial statements would most likely detect this when:

Discussing capitalization policies with Miller's controller. Examining maintenance expense accounts. Observing, during the physical inventory observation, that the warehouse had been painted. Examining the construction work orders supporting items capitalized during the year.