Principles of Auditing 17-30
Situation
Re-
port
Comment
1. A company has not followed generally accepted accounting principles in the recording of its leases.
7
2. A company has not followed generally accepted accounting principles in the recording of its leases. The amounts involved are immaterial.
1
3. A company valued its inventory at current replacement cost. While the auditor believes that the inventory costs do approximate replacement costs, these costs do not approximate any GAAP inventory valuation method.
7
4. A client changed its depreciation method for production equipment from the straight-line method to the units-of-production method based on hours of utilization. The auditor concurs with the change.
2
5. A client changed its depreciation method for production equipment from the straight-line to a units-of-production method based on hours of utilization. The auditor does not concur with the change.
7
6. A client changed the depreciable life of certain assets from 10 years to 12 years. The auditor concurs with the change.
3
7. A client changed the depreciable life of certain assets from 10 years to 12 years. The auditor does not concur with the change. Confined to fixed assets and accumulated depreciation, the misstatements involved are not considered pervasive.
3
8. A client changed from the method it uses to calculate postemployment benefits from one acceptable method to another one. The effect of the change is immaterial this year, but is expected to be material in the future.
1
9. A client changed the salvage value of certain assets from 5 percent to 10 percent of original cost. The auditor concurs with the change.
1
10. A client uses the specific identification method of accounting for valuable items in inventory, and LIFO for less valuable items. The auditor concurs that this is a reasonable practice.
1
11. Due to recurring operating losses and working capital deficiencies, an auditor has substantial doubt
Re-
port
Comment
1. A company has not followed generally accepted accounting principles in the recording of its leases.
7
2. A company has not followed generally accepted accounting principles in the recording of its leases. The amounts involved are immaterial.
1
3. A company valued its inventory at current replacement cost. While the auditor believes that the inventory costs do approximate replacement costs, these costs do not approximate any GAAP inventory valuation method.
7
4. A client changed its depreciation method for production equipment from the straight-line method to the units-of-production method based on hours of utilization. The auditor concurs with the change.
2
5. A client changed its depreciation method for production equipment from the straight-line to a units-of-production method based on hours of utilization. The auditor does not concur with the change.
7
6. A client changed the depreciable life of certain assets from 10 years to 12 years. The auditor concurs with the change.
3
7. A client changed the depreciable life of certain assets from 10 years to 12 years. The auditor does not concur with the change. Confined to fixed assets and accumulated depreciation, the misstatements involved are not considered pervasive.
3
8. A client changed from the method it uses to calculate postemployment benefits from one acceptable method to another one. The effect of the change is immaterial this year, but is expected to be material in the future.
1
9. A client changed the salvage value of certain assets from 5 percent to 10 percent of original cost. The auditor concurs with the change.
1
10. A client uses the specific identification method of accounting for valuable items in inventory, and LIFO for less valuable items. The auditor concurs that this is a reasonable practice.
1
11. Due to recurring operating losses and working capital deficiencies, an auditor has substantial doubt