Ways in which long-lived assets can be fraudulently overstated include:

• Fictitious assets on the books
• Improper and incomplete depreciation
• Failure to record impairment of assets, especially goodwill
• Expired or worthless assets left on a companys books
• Assets overvalued upon acquisition, especially in the purchase of a company

Questions: (1a) What incentives might motivate management to overstate fixed assets?

(1b) What other factors should the auditor consider when assessing fraud risk related to long-lived assets?

Question 2: Explain why in some audit settings with long-lived assets auditors choose to perform only substantive tests of details, even though controls are designed effectively.