Because the failure to record disposals of property, plant, and equipment can significantly affect the financial statements, the search for unrecorded disposals is essential.Which of the following is not a procedure used to verify disposals?
A)Make inquiries of management and production personnel about the possibility of the disposal of assets.
B)Review whether newly acquired assets replace existing assets.
C)Test the valuation of fixed assets recorded in prior periods.
D)Review plant modifications and changes in product line, taxes, or insurance coverage.

Question

Quizplus · Accepted Answer

Testing the valuation of fixed assets recorded in prior periods is not a procedure used to verify disposals. This procedure focuses on the valuation of existing assets, rather than identifying whether disposals have been recorded. The other three choices are all procedures used to verify disposals. Inquiries of management and production personnel can reveal whether assets have been sold, scrapped, or given away. Reviewing whether newly acquired assets replace existing assets can help identify disposals that may have been overlooked. Reviewing plant modifications and changes in product line, taxes, or insurance coverage can also provide evidence of disposals.

Because the Failure to Record Disposals of Property, Plant, and Equipment