2

Please see below the discussion questions for this week:

Question 1:

Ways in which long-lived assets can be fraudulently overstated include:

Fictitious assets on the books

Improper and incomplete depreciation

Failure to record impairment of assets, especially goodwill

Expired or worthless assets left on a company’s books

Assets overvalued upon acquisition, especially in the purchase of a company

Questions: (1a) What incentives might motivate management to overstate fixed assets?

(1b) What other factors should the auditor consider when assessing fraud risk related to long-lived assets?

Question 2: Explain why in some audit settings with long-lived assets auditors choose to perform only substantive tests of details, even though controls are designed effectively.