You are auditing the acquisition and payment cycle and 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 insuffient.
D) company has a policy of selling relatively new assets.

Question

Quizplus · Accepted Answer

The presence of excessive recurring losses on retired assets indicates that the depreciation charges may be insufficient. This means that the assets are not being fully depreciated over their useful lives, leading to higher losses when they are retired. Insured values being greater than book values may indicate overinsurance or a lack of adjustment for depreciation. A large number of fully depreciated assets is not necessarily problematic as long as they have been appropriately retired and removed from the accounting records. Selling relatively new assets also would not lead to excessive recurring losses on retired assets.

You Are Auditing the Acquisition and Payment Cycle and the Presence