[hav2pass]

I took a practice exam and was confused on this point.

We are asked to select 2 substantive tests for the assertion: Fixed asset included in the balance sheet exist.

The relevant choices are:

1. Vouch additions to the property, plant and equipment subsidiary ledger.

2. Make a physical inspection of major property, plant and equipment acquisitions. 

3. From the fixed assets sub-ledger, trace a selection of fully-depreciated assets from the ledger to the manufacturing floor and check the associated identification number.

The answer is 1 & 2. I choose 2 & 3. Why is 3 not the right answer?

Thanks!

BEC 86 (expires Sept'11)
FAR 85
REG 87
AUD 8/27 - waiting

[mla1169]

The substantive tests are to substantiate the balances presented on the financial statements. If the asset is fully depreciated you would not try to substantiate it, because its effect on the financial records is zero.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[hav2pass]

Thanks mla!! Good luck for the upcoming exam

BEC 86 (expires Sept'11)
FAR 85
REG 87
AUD 8/27 - waiting

[lr_cpa]

hav2pass,

Also, “Tracing” something is done in an effort to validate the “Completeness” assertion, which is not being asked in the question. But rather, the “Existence” is assertion is being evaluated, which can be done by physically inspecting the assets as in #2 or by “vouching” in #1.

REG 5/27/11 86 1st attempt [CPA excel questions, Yaeger Audio, Wiley book]
FAR 8/04/11 90 1st attempt [used CPA excel as primary, Yaeger Audio, and Wiley book]
AUD 10/01/11 90 1st attempt [used CPA excel with Wiley as supplement]
BEC 11/29/11 84 1st attempt [using Wiley with CPA excel as MCQ supplement]

DONE

[hav2pass]

Thanks lr_cpa! That helps. I will remember it for the exam

BEC 86 (expires Sept'11)
FAR 85
REG 87
AUD 8/27 - waiting

[Author]

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