You are auditing the acquisition and payment cycle and note the presence of excessive recurring losses on retired assets.You may conclude that:
A)insured values are greater than book values.
B)there are a large number of fully depreciated assets.
C)depreciation charges may by insufficient.
D)company has a policy of selling relatively new assets.

Question

Quizplus · Accepted Answer

Excessive recurring losses on retired assets may indicate that depreciation charges are insufficient. This means that the company may not be accounting for the true decrease in value of these assets over time, resulting in higher losses when they are retired. Insured values being greater than book values would indicate that the company is over-insuring their assets, but this would not necessarily lead to excessive losses on retired assets. A large number of fully depreciated assets or a policy of selling relatively new assets may result in losses, but not necessarily excessive ones.

You Are Auditing the Acquisition and Payment Cycle and Note