ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 48  October 2024 CPA Licensure Examination

FARAP-4805
FINANCIAL ACCOUNTING & REPORTING / AUDITING PRACTICE S. IRENEO  G. MACARIOLA  C. ESPENILLA  J. BINALUYO

INTANGIBLE ASSETS
INTANGIBLE ASSET – is a long-term asset that is non-monetary in nature and without physical existence. It arises
from contractual or other legal rights. The benefits the entity derives from the asset may be in the form of the sale of
certain products or some cost savings. An intangible asset must be identifiable, meaning it can be sold or transferred
without selling the entire business.
Measurement at Initial Recognition - The intangible asset is initially recognized and recorded at cost. The cost of an
identifiable intangible asset includes all directly attributable costs incurred to develop or acquire the asset; plus, other
incidental costs necessary to prepare the asset for its intended use. The purchase price depends upon how the intangible
asset is acquired as follows:
By purchase – the purchase price including any import duties and non-refundable purchase taxes and any directly
attributable expenditure on preparing the asset for its intended use. Directly attributable costs include:
a) Cost of employee benefits directly from bringing the asset to its working condition
b) Professional fees arising from bringing the asset to its working condition
c) Cost of testing whether the asset is functioning properly. Any trade discounts and rebates are deducted
in arriving at the cost.
By a deferred plan beyond normal credit terms – the cash price equivalents (the cash price or the present
or discounted value for a non-interest long term liability). The difference of the cash price and the total amount
of payments is recognized as interest expense over the term of the credit period.
By the issuance of equity instruments – the fair market value of the instruments, which is equal to the fair
market value of the intangible.
By way of a government grant - The entity may choose to recognize both the intangible asset and the grant
initially at fair value or at a nominal value plus any expenditure that is directly attributable to preparing the
asset for its intended use.
By part of a business combination – the fair market value on the date of acquisition. The fair market value is
equal to the following.
• if there is an active market – quoted market price which is usually the current bid price.
• If there is no active market – the amount, which would have been paid by the company in an arm’s
length transaction between knowledgeable and willing parties (by discounting estimated cash flows
from the intangible asset).
If the fair market value of the intangible asset in a business combination cannot be measured reliably, the asset
is not recognized as a separate intangible but is included within the over-all cost of the purchased goodwill.
By exchange – the cost of the intangible asset is measured at the fair market value unless the transaction lacks
commercial substance. If the exchange lacks the necessary commercial substance, the intangible asset is
measured at the carrying value of the asset given up.
Internally generated intangible – are the cost that can be directly attributed or allocated on a reasonable and
consistent basis to creating, producing and preparing the asset for its intended use. The cost includes the
following:
• cost of materials and services used or consumed in generating the intangible asset.
• Salaries and wages and other employment related cost of personnel directly engaged in generating the
asset.
• Expenditure that is directly attributable to generating the asset such as fees to register a legal right and
amortization of patents and licenses that are used to generate the asset.
• Overhead that are necessary to generate the asset and that can be allocated on a reasonable and consistent
basis to the asset.
Measurement subsequent to acquisition: An entity shall choose either the cost model or the revaluation model as
its accounting policy. If an intangible asset is accounted for using the revaluation model, all the other assets in its class
shall also be accounted for using the same model, unless there is no active market for those assets.
Cost model – after initial recognition, the intangible asset shall be carried at its cost less any accumulated
amortization and any accumulated impairment losses.
Revaluation model – after initial recognition, an intangible asset shall be carried at a revalued amount, being
its fair value at the date of revaluation less any subsequent accumulated amortization and any accumulated
impairment losses.
Amortization – the amortizable amount of an intangible asset that has finite life should be allocated on a systematic
basis over the best estimate of its useful life. The intangible assets with indefinite lives are not amortized but are tested
for impairment at least annually. The method of amortization shall reflect the pattern in which the future economic
benefits from the asset are expected to be consumed by the entity. If the pattern cannot be determined reliably, the
straight- line method is used. The residual value of an intangible asset shall be presumed to be zero, unless a third
party is committed to buy the intangible asset at the end of its useful life or unless there is an active market. Any
change in the method of amortization or life of an intangible should be treated as a change in estimate.
Useful Life –An intangible asset shall be regarded by the entity as having an indefinite useful life when there is no
foreseeable limit to the period over which the asset is expected to generate net cash flows for the entity. However,
IFRS for SMEs considers all intangible assets to have finite useful life, and if a private entity is unable to make a reliable
estimate of the useful life of an intangible asset, the life shall be presumed to be 10 years.
Review of Amortization period and amortization method If there has been a significant change in the expected
pattern of economic benefits from the asset or a change in the amortization period, the amortization method should be
changed to reflect the changed pattern and/or the revised remaining life of the asset. Such changes should be accounted
for as changes in accounting estimates in accordance with the accounting standard IAS 8 Accounting Policies, Changes
in Estimates and Errors, by adjusting the amortization charge for the current and future periods.

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INTANGIBLES
Subsequent cost – Subsequent expenditures incurred can only be capitalized if the expenditure increases the future
economic benefits of the asset beyond its original assessed standard of performance. This increase in standard of
performance includes extension of useful life, increase in revenue capacity, or the capability to reduce expenses. Any
other subsequent costs expenditure should be recognized as an expense in the period incurred.
Specific guidelines on specific intangibles:
Patent- an exclusive right granted by the government to an inventor enabling him to control the manufacture, sale or
other use of his invention for a specified period of time. The cost of a purchased patent should be amortized over its
legal life (20 years) or useful life, whichever is shorter.
The cost of a developed patent (the cost should include only the licensing and other related legal fees in securing the
patent rights) should be amortized over its legal life or useful life, whichever is shorter.
If a competitive patent was acquired to protect the old patent, the competitive patent should be amortized over the
remaining life of the old patent.
Legal fees and other costs of successfully prosecuting or defending a patent should be charged outright as an expense.
Any cost of unsuccessful litigation on patent should also be charged outright as an expense and the carrying amount of
the old patent is derecognized.
Copyright – exclusive right granted by the government to the author, composer or artist enabling to publish
sell or otherwise benefit from his literacy, musical and artistic work.
The cost should be amortized over the periods benefitted by it or legal life whichever is shorter.
Franchise – an exclusive right granted by the franchisor (government or private companies) to a franchisee to use the
property or the rights (trademark, patent and process of the franchisor).
If the franchise has a definite period – it should be amortized over the definite period (not exceeding 20 years) or useful
life whichever is shorter. If the franchise has an indefinite life – it is not amortized but should however be reviewed for
impairment at each reporting date.
Trademark/trade name/brand name – is a symbol, sign, slogan or name used to mark a product to distinguish it
from other products. The cost of the intangible should include
a. When purchased –the purchase price or the cash price equivalents.
b. When developed –the expenditures required to establish including filing fees, registry fees and other
expenses incurred in securing the trademark.
The legal life of a trademark or trade name or brand name is 10 years and maybe renewed for periods of
10 years each – R.A. No. 8293). The cost of a trademark is not amortized but subject to test of impairment
at least annually as a result of the almost automatic renewal. Trademark may be properly classified as an
intangible asset with an indefinite life. However, if its life is no longer considered indefinite, it should be
amortized over its remaining useful life.
Goodwill - Only a purchased goodwill (external) should be recognized as an asset. Developed (internal)
goodwill should be charged outright as an expense. Subsequent costs related to the goodwill should be charged
immediately against income. The cost of goodwill is not amortized because its useful life is indefinite. However,
goodwill shall be tested for impairment at least annually or more frequently if events or changes in
circumstances indicate a possible impairment. The amount of goodwill impairment is determined by comparing
the recoverable amount for the cash-generating unit (CGU) to which the goodwill belongs against the carrying
value of the cash-generating unit to which the goodwill belongs.
• If the recoverable amount of the CGU exceeds the carrying value of the CGU, the CGU and the goodwill
allocated to that unit shall be regarded as not impaired.
• If the carrying amount of the CGU exceeds the recoverable amount of the unit, the company must recognize
an impairment loss.
Research – an activity undertaken to discover new knowledge that will be useful in developing new product or that
will result in significant improvement of existing product. Examples of these are:
1. laboratory research aimed at obtaining or discovering new knowledge
2. searching for application of research findings and other knowledge
3. conceptual formulation and design of possible product or process alternative, and
4. testing in search for product or process alternative.
Development: is the application of research findings or other knowledge to a plan or design for the production of
new or substantially improved material, device, product, process, system, and prior to the commencement of
commercial production. Examples of these are:
1. design, construction and testing of pre-production prototype and model
2. design of tools, jigs, molds and dies involving new technology
3. design, construction and operation of a pilot plant that is not of a scale economically feasible to the
enterprise for commercial production, and
4. design, construction and testing of a chosen alternative for new or improved product or process.
The standard allows recognition of an intangible asset during the development phase, provided the
enterprise can demonstrate all of the following:
a. Technical feasibility of completing the intangible asset so that it will be available for use or sale
b. Its intention to complete the intangible asset and either use it or sell it.
c. Its ability to use or sell the intangible asset
d. The mechanism by which the intangible asset will generate probable future economic benefits.
e. The availability of adequate technical, financial and other resources to complete the development and to use or
sell the intangible asset, and
f. The entity’s ability to reliably measure the expenditures attributable to the intangible asset during its
development.
If the company cannot distinguish the research phase from the development phase, the company treats the
expenditure as if it was incurred in the research phase only.
Internally Developed Computer Software- the cost incurred on the research stage in creating the software should
be charged outright to expense when incurred until a technological feasibility has been established for the product.
Technological feasibility is established when a company has produced either a detailed program design of the
software or a working model. After establishing technological feasibility, the cost of software to be capitalized
should include the costs of coding and testing and the cost to produce the product masters.

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INTANGIBLES

The cost of the computer software should be allocated based on the pattern in which the asset’s future economic
benefits are expected to be consumed by the entity. If such pattern cannot be determined reliably, the straight-
line method is used.
Purchased Software:
a. If it is for sale – should be treated as an inventory
b. If it is held for licensing or rental to others - recognized as an intangible asset
c. If it is to be used and is an integral part to the hardware – treated as part of the hardware and capitalized as
property, plant and equipment.
Reversal of impairment loss for an Individual Asset:
The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall
not exceed the carrying amount that would have been determined (net of amortization or depreciation) had no
impairment loss been recognized for the asset in prior years.
A reversal of an impairment loss for an asset other than goodwill shall be recognized immediately in profit or loss,
unless the asset is carried at revalued amount. A reversal of impairment loss on a revalued asset is credited directly
to equity under the heading revaluation surplus. However, to the extent that an impairment loss on the same revalued
asset was previously recognized in profit or loss, a reversal of that impairment loss is also recognized in profit or loss.

FINANCIAL ACCOUNTING AND REPORTING - THEORIES

1. Under PAS 38, which of the following is not part of the definition of intangible assets
a. Identifiable non-monetary assets c. Future economic benefits
b. Controlled by the enterprise d. With physical substance
2. It is the systematic allocation of the cost of the intangible asset, less any residual value, as an expense over the
asset’s useful life
a. Amortization c. Bifurcation
b. Impairment d. Realization
3. Legal fees in the registration of patent rights were incurred by an entity at the beginning of the year. Towards the
end of the year, legal fees were incurred in successfully defending the entity’s patent rights. What is the proper
treatment of these legal fees?
a. Both legal fees are capitalized.
b. Both legal fees are expensed in the period incurred.
c. Legal fees in the registration are capitalized while fees in the patent defense are expensed.
4. Intangible assets with indefinite useful lives are
a. Amortized over a period of twenty years.
b. Amortized over a period of twenty years and must be tested for impairment at least annually.
c. Not amortized, but must be tested for impairment at least annually.
d. Not amortized and need not be tested for impairment.
5. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless:
Statement I: There is a commitment by a third party to purchase the asset at the end of its useful life
Statement II: There is an active market for the asset and it is probable that such a market will exist at
the end of the asset’s useful life.
a. Only statement I is true c. Both statements are false
b. Only statement II is true d. Both statements are true.
6. Which of the following statements is false regarding Patent?
a. If the patent is acquired by purchase, then its capitalizable cost includes purchase price and other incidental
costs
b. If the patent is internally developed, the related R&D expenditures are expensed as incurred; the
capitalizable cost includes only licensing and legal fees incurred in securing the patent rights.
c. Legal fees and other costs of successfully defending a patent are capitalized as patent cost.
d. Patent should be amortized over its legal life or useful life, whichever is shorter.
7. Which of the following statements is false regarding Franchise?
a. Franchise agreement may be made between the government and private entities.
b. The cost of franchise includes the lump-sum payment and all legal fees and expenses incurred in connection
with the franchise acquisition (initial franchise fee)
c. The required periodic or continuing franchise fee should be expensed in the period incurred
d. Franchise should be amortized over contract term or useful life, whichever is longer
8. Which of the following statements is false regarding Goodwill?
a. Internally developed goodwill is not recognized as an intangible asset
b. Purchased goodwill arising from business combination is recognized as an asset
c. Impairment loss recognized on goodwill shall not be reversed in a subsequent period.
d. Goodwill should be amortized over its useful life but not to exceed 20 years
9. Which of the following statements is false regarding Trademark?
a. It is a symbol, sign, name, or logo or other distinctions given to companies for exclusive use
b. The legal life of the trademark in the Philippines is for a non-renewable term for 10 years.
c. The trademark with an indefinite life is not amortized but tested regularly for impairment
d. Cost of successfully defending a trademark in courts are expensed outright
10. Which of the following statements is false regarding Research and Development (R&D) costs?
a. Research activity is the original and planned investigation undertaken with the prospect of gaining new
scientific or technical knowledge and understanding on a project
b. Development is the application of research findings or other knowledge to a plan or design for the
production of new product prior to the start of commercial production
c. Research cost is recognized as an outright expense in all cases
d. Development cost is recognized as an outright expense in all cases

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INTANGIBLES

FINANCIAL ACCOUNTING AND REPORTING & AUDIT PRACTICE - PROBLEMS

Problem 1: (AUDIT PRACTICE - INTANGIBLES RECOGNITION TEST)
Divina Corp. provided you with the following data:
1. Lease prepayments (6 months rent paid in advance) 60,000
2. Cost of equipment obtained under a finance lease 700,000
3. Cost of internally generated brands and mastheads 670,000
4. Separately purchased publishing titles 230,000
5. Cost of internally generated customer list 520,000
6. Purchased recipes and secret formulas from a previous competitor 840,000
7. Costs incurred in the formation of the corporation including pre-operating costs and 900,000
operating losses during the start-up of the business.
8. Employee training costs incurred which enhanced their competencies in the
specialized industry which the company belongs 950,000
9. Massive advertising costs and promotional campaigns to launch the company, thus
enhancing the company’s position in the industry 1,400,000
10. Cost of internally generated Goodwill 300,000
11. Total acquisition cost of a business (FMV of identifiable net assets at P9,500,000) 10,300,000
12. Cost of testing in search/discovery of product alternatives (new knowledge) 165,000
13. Design, construction, and testing of preproduction prototypes and models 223,000
14. Routine, on-going, continuing efforts to refine, enrich, or otherwise, improve upon
the qualities of an existing product 400,000
15. Research and development cost in creating a patented technology 840,000
16. Cost incurred to acquire legal rights and in securing the patent for the previous item 270,000
17. Costs of successful legal suit to protect the previous patent 230,000
18. Cost of purchasing a patent from an inventor 420,000
19. Initial franchise fees 540,000
20. Continuing franchise fees 200,000
21. Cost of purchasing a copyright 900,000
22. Cost of developing a trademark 61,000
23. Computer software for a computer-controlled machine that cannot operate without
that specific software (e.g. an operating system/software of a computer facility) 220,000
24. Hardware components of the computer facility 780,000
25. Stand-alone or application computer software 370,000

How much is the total intangible assets, including goodwill?

a. 3,570,000 b. 4,000,000 c. 4,370,000 d. 4,600,000

Problem 2: Diana Inc., a manufacturer of plastic materials useful for various textile company, spent
P2,050,000 in research and development costs which resulted to a new formula which makes its plastic
products more environmentally friendly and biodegradable. The patent related to the “know how” was
approved and granted by the government in late December of 2017 after payment of the necessary legal and
processing fees of P540,000. While the legal life of the patent is 20 years, the company estimates that it would
be able to benefit from the formula for ten years, after which competitors would have come up with the same
formula.
On January 1, 2021, Diana Inc. spent P342,000 to acquire a related patent which successfully extended the life
of original patent for additional 5 years.
On January 1, 2022 the company successfully defended the patent for a total legal fee of P175,000.
By the end of 2023, however, the company determined that with the competitor launching a more superior
product, the patent had been impaired. The company estimates that the remaining net cash flows from the
patent shall be P88,771 annually for the next five years, the revised remaining useful life. The appropriate market
rate of interest was 12% at this time. The PV factor of 1 at 12% for five periods without ordinary annuity is 0.5674
while the PV factor of 1 at 12% for five periods with ordinary annuity is at 3.60478.
1. What is the amortization expense in 2018?
a. 50,000 b. 54,000 c. 27,000 d. 25,000
2. What is the amortization expense in 2021?
a. 50,000 b. 54,000 c. 60,000 d. 72,000
3. What is the impairment loss to be recognized in the 2023 income statement?
a. None b. 200,000 c. 220,000 d. 320,000
4. What is the amortization expense in 2024?
a. 50,000 b. 54,000 c. 60,000 d. 64,000

Problem 3: Colombia Company incurred P1,500,000 (P400,000 in 2022 and P1,100,000 in 2023) to develop a
computer software product, P500,000 of which was expensed before technological feasibility was established in
early 2023. Based on the pattern of consumption of economic benefit from the computer software, the product
will earn future revenues of P4,000,000 over its 5-year life, as follows: 2023 – P1,000,000; 2024 – P1,000,000;
2025 – P800,000; 2026 – P800,000; and 2027 – P400,000. How much is the total expenses for the year 2023?
a. 250,000 b. 350,000 c. 300,000 d. 750,000

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Problem 4: The Macrosoft Inc. is engaged in developing a computer software for various industries. Below are
the various expenditures incurred related to a project:

Salaries and wages of programmers doing research incurred in 2022 P245,000

Professional fees paid to outside consultants assisting in various research activities 2022 280,000
Application of research findings including expenses related to the project to complete the
detailed program design (cost to establish technical feasibility of the computer software) 313,000
in late 2022
Expenses related to the project after the completion of the detailed program design
(after technological feasibility has been established) in early 2023 but before software is 330,000
available for production (e.g. cost of coding and testing the product master)
Engineering follow-through during the early stage of the software commercial production 47,000
Other production costs to prepare the software for sale in 2023 (e.g. cost of duplicating 243,000
the product master)

Additional data for 2023:

Sales for the year P2,000,000
Portion of goods available for sale that were sold during year 60%

1. Total amount related to the development of computer software that should be expensed when incurred
a. 245,000 b. 525,000 c. 838,000 d. 1,168,000

2. Amount to be capitalized as software development cost subject to amortization

a. 313,000 b. 330,000 c. 372,000 d. 643,000

3. Cost of sales in 2023 if the computer software will benefit the company for 3 years, after which a more
superior software would have been created rendering the developed software obsolete.
a. 174,000 b. 240,000 c. 211,800 d. 260,000

Problem 5: Argentina Company provided you the following information pertaining to its Research and
Development activities for the year 2023:
Searching for applications of new research findings P57,000
Trouble-shooting in connection with breakdowns during commercial production 87,000
Adaptation of an existing capability to a particular requirement or customer’s need
as a part of continuing commercial activity 39,000
Engineering follow-through in an early phase of commercial production 45,000
Laboratory research aimed at discovery of new knowledge 204,000
Design of tools, jigs, and molds involving new technology 72,000
Quality control during commercial production, including routine testing of products 174,000
Testing in search for product or process alternative 300,000
Design and construction of preproduction prototype and model 384,000
Routine and on-going efforts to refine, enrich, or otherwise, improve upon the
qualities of an existing product 750,000
Patent acquired solely for the use in the project 120,000
Special Equipment acquired and useful for various similar research activities 100,000
Patent acquired for use in several research projects including the project in 2023 160,000

The Equipment and Patents have been found to be useful for approximately five years. You have further
discovered that both Patents and the Equipment were acquired at the beginning of 2023.

What is the total amount to be classified and expensed as research and development for 2023?
a.1,095,000 b. 1,137,000 c. 1,189,000 d. 1,561,000

Problem 6: On January 1, 2023, the Mighty Corp. signed an agreement to operate as a franchise of Memory
Inc., for an initial franchise fee of P3,000,000. Of the amount, P600,000 was paid when the agreement was
signed and the balance payable in 3 annual equal payments at the beginning of each year starting 2024. The
agreement provides that the down payment is not refundable and that no future services are required of the
franchisor. The implicit rate for similar loans on this date was 12%. The agreement provides for a 5% continuing
franchise fee based on the revenue of the franchisee.

Mighty Corp. had a total revenue of P9M in 2023. By the end of the year, company further estimates that the
future net cash flows from the asset’s continued use is at P520,000 annually. Market rate of interest at the end
of the year was at 10%.

1. Assuming the franchise agreement was for 5 years, what is the total expense related to the franchise to be
recognized in the 2023 profit or loss?
a. 1,553,711 b. 1,323,135 c. 1,184,869 d. 680,576

2. Assuming that the franchise agreement was for an indefinite period, what is the total expense related to the
franchise to be recognized in the 2023 profit or loss?
a. 1,359,153 b. 909,153 c. 680,576 d. 450,000

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Problem 7:
A trademark with a fair market value of P1,000,000 was acquired by Pietro Corp. in exchange of a non-monetary
asset with a carrying value of P600,000 on January 1, 2021. P500,000 Cash was paid on the exchange which
was considered to be with commercial substance.
By the end of 2021 and 2022, for the remaining life of the trademark, the future net annual cash flows were
estimated at P200,000.
Expenditures of P98,000 were incurred on July 1, 2023 for successfully defending the trademark. By the end of
2023, however, the estimated annual net cash flows had been revised to P80,000 because of a recent
technological development in the industry.
The prevailing market rate of interest were at 9%, 9.5% and 10% at the end of 2021, 2022 and 2023,
respectively.

1. Assuming the trademark had a useful life of 10 years, what is the total expense related to the trademark to
be recognized in the 2023 profit or loss?
a. 100,000 b. 198,000 c. 410,526 d. 508,526
2. Assuming that the trademark had an indefinite useful life, what is the total expense related to the trademark
to be recognized in the 2023 profit or loss?
a. 98,000 b. 198,000 c. 298,000 d. 200,000

Problem 8: The Kit Corp. is assessing one of its operating segment for impairment as of December 31, 2023
due to a competitor launching a more superior product rivaling the product line being produced by the segment.
The segment produces one of the company’s product lines and is considered a separate cash generating unit from
the rest of its other factories. The assets in the factory included the Land (Cost: P2M); Building (Cost: P6M),
Equipment (ABC) (Cost: P4M) and Goodwill (Cost: P1M) which were acquired in January of 2019 through a
business combination. Another Equipment (DEF) (Cost: P3M) was acquired in January of 2022 (when the product
line was expanded). The building had a useful life of 20 years while the equipment were estimated to have a
useful life of 10 years. Assets are being depreciated under the straight-line method to zero residual value.

The client ascertained that the product being currently produced by the factory can now only generate cash flows
for the company for the next five years, after which the assets in the factory can be disposed for a total of lump-
sum of P1.4M. The following presents the estimates of the said cash flows (pre-tax):
Year Revenues Expense, excluding
Depreciation
2024 P4,200,000 P1,680,000
2025 3,800,000 1,910,000
2026 3,200,000 2,050,000
2027 2,400,000 1,610,000
2028 1,300,000 800,000
The fair value of the group of assets net of estimated disposition costs was determined to be P6.5M. The prevailing
pre-tax discount rate appropriate for this analysis is 6% while post-tax discount rate is at 8%.
1. How much is the recoverable amount of the group of assets?
a. 6,500,000 b. 6,024,397 c. 7,070,558 d. 6,740,392
2. How much is the impairment loss?
a. 4,829,442 b. 5,875,603 c. 5,400,000 d. 5,159,608
3. Assuming that the land had a fair market value less cost to sell at P2.2M what is the carrying value of the
building after impairment loss recognition?
a. 2,034,807 b. 2,563,766 c. 2,275,281 d. 2,396,828
4. Assuming that the land and building had fair value less cost to sell at P2.2M and P3.5M, what is the
carrying value of Equipment DEF after impairment loss recognition?
a. 545,455 b. 286,035 c. 858,668 d. 676,578

AUDITING PRACTICE – SUBSTANTIVE TESTS

(Significant Business Process: Acquire to Retire)

1. Examining documentation of the purchase of intangible assets vouched from accounting records is consistent
with the auditor’s objective of validating the management’s assertion of
a. Valuation and completeness c. Valuation and rights/obligation
b. Existence and completeness d. Rights/obligation and existence

2. In auditing intangible assets, an auditor most likely would review or recompute amortization and determine
whether the amortization period is reasonable in support of management’s financial statement assertion of:
a. Valuation c. Completeness
b. Existence d. Rights and obligation

- END -

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