As it relates to property,plant and equipment,what specific risk relating to earnings management do the auditors assess?
A)Equipment has been initially recorded at cost.
B)Depreciation has been recorded using accelerated methods.
C)Repairs and maintenance have been expensed rather than included as assets.
D)Useful lives have been extended without justification.

Question

Quizplus · Accepted Answer

Auditors assess the risk of management extending the useful lives of property, plant, and equipment without proper justification as a way of artificially inflating earnings. This can lead to lower depreciation expenses, which in turn will increase reported earnings. Therefore, auditors carefully scrutinize the company’s assumptions and judgments related to useful lives and depreciation methods.

As It Relates to Property,plant and Equipment,what Specific Risk Relating