For each of the following misstatements in property, plant, and equipment accounts, state an internal control that the client can implement to prevent the misstatement from occurring and a substantive audit procedure that the auditor can use to discover the misstatement:
1. The asset lives used to depreciate equipment are less than reasonable, expected useful lives.
2. Capitalizable assets are routinely expensed as repairs and maintenance, perishable tools, or supplies expense.
3. Acquisitions of property are recorded at incorrect amounts.
4. A loan against existing equipment is not recorded in the accounting records. The cash receipts from the loan never reached the company because they were used for the down payment on a piece of equipment now being used as an operating asset. The equipment is also not recorded in the records.
5. Computer equipment that is abandoned or traded for replacement equipment is not removed from the accounting records.
6. Depreciation expense for manufacturing operations is charged to administrative expenses.
7. Tools necessary for the maintenance of equipment are stolen by company employees for their personal use.
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