Using Data Analytics to Test Repairs and Maintenance Expenses
How can auditors utilize data analytics to help test repairs and maintenance expense for overstatement?
Group of answer choices:
A. Vouching large repair and maintenance expenditures
B. Identifying expenditures with characteristics that indicate they are capital expenditures
C. Identifying capital expenditures that should have been expensed
D. Identifying expenditures for repairs and maintenance that were not performed
Answer:
Auditors can use data analytics to test repairs and maintenance expenses for overstatement by identifying capital expenditures and verifying large repair and maintenance expenditures.
Auditors may employ data analytics techniques to assess the accuracy of reported repairs and maintenance expenses, thus ensuring that they are not overstated. This can be done by vouching for large repair and maintenance expenditures to verify their legitimacy and appropriateness. Data analytics can also help auditors in identifying expenditures with characteristics that indicate they are capital expenditures, which should be treated differently from repair and maintenance costs.
Additionally, auditors can detect capital expenditures that should have been expensed as repairs and maintenance, avoiding misclassification. Lastly, data analytics can aid in identifying expenditures for repairs and maintenance that were not actually performed, which would indicate potential overstatement or fraud. Through these methods, auditors can maintain a high level of accuracy and confidence in the financial statements they review.