ACCA Audit and Assurance (F8) Practice Exam

What must auditors confirm about intangible assets during audits?

1. Whether they are genuinely liabilities

2. Whether they have been amortized correctly

3. Whether they are listed under current assets

4. Whether they are fully depreciated

The correct answer is: Whether they have been amortized correctly

Auditors must confirm whether intangible assets have been amortized correctly because amortization is an essential accounting concept that applies to the systematic allocation of the cost of an intangible asset over its useful life. Intangible assets, unlike tangible assets, cannot be physically touched or measured, yet they often represent significant value to an organization, such as patents, trademarks, or software. During an audit, it is crucial for auditors to ensure that the amortization of these assets aligns with applicable accounting standards, which dictate how and when amortization should be recognized. Proper amortization reflects the consumption of the asset's economic benefits over time, and inaccuracies can lead to misstatements in the financial statements. If an asset is not amortized correctly, it could misrepresent the financial position and performance of the company, impacting stakeholders' decisions. In contrast, the other options do not align with the typical focus of auditors on the financial reporting of intangible assets. For example, intangible assets are not liabilities, nor are they classified under current assets unless they are expected to be realized within a business’s operating cycle. Additionally, while depreciation applies to tangible assets, only amortization needs to be verified for intangible assets, as the concept of depreciation does not apply to them.