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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,
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.
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