Capitalizing items that are not fixed assets may result in inflated net income and assets, financial statement misstatements, fines and penalties, or reputational damage. Choose the best control activity to address this risk.
A) Tagging all fixed assets
B) Expand the list of bidders to make it more difficult for bidders to collude.
C) Require bidders to sign and submit non-collusion affidavits stating the bidder has not colluded with employees or other bidders.
D) Have a code of conduct that employees must agree to and sign, as well as training for employees that includes firing and legal actions for engaging in fraud.

Question

Quizplus · Accepted Answer

Tagging all fixed assets helps in accurately tracking and managing them, ensuring that items not qualifying as fixed assets are not mistakenly capitalized, thus addressing the risk of inflated net income and assets.

Capitalizing Items That Are Not Fixed Assets May Result in Inflated