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Essay / Material Misstatements at Intel and Causes of High Risk significant anomalies. The main reason for these assessments is the drastic decrease in depreciation expense due to an increase in the useful life of certain equipment and machines from four to five years. Specifically, the depreciation expense may have been incorrectly valued, which would result in a violation of the valuation assertion. Additionally, reported depreciation expense may not represent the entire depreciation expense, which would result in a violation of the completeness assertion. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay High Risk Accounts and Claims After reviewing the information in the article, Depreciation Expense has a high risk of being materially inaccurate. As a result, Intel's entire net profit could also be significantly inaccurate. Impairment is considered high risk because Intel has increased the useful life of a significant amount of equipment and machinery by four to five years. Intel estimates that the increase in useful life results in a $1.5 billion decrease in annual depreciation expense. $1.5 billion represents almost ten percent of 2015 pre-tax income. The risk is high due to the combination of the large number of calculations and the large amount of money. Management's valuation assertion carries high risk due to lower depreciation expense. High risk applies to the valuation assertion because management may be wrong in its decision to increase the useful life of certain equipment. It is possible that management increased the useful life when, in fact, there was no need to increase the useful life at all because the initial estimate was correct. In this case, an incorrect valuation would not be intentional, because the negative implications of a longer lifespan outweigh the short-term increase in net income. A longer useful life could indicate a slowdown in innovation. Management's assertion of completion also carries high risk. High risk applies to the completion assertion because Intel could have failed to recognize a portion of the depreciation expense after the recalculation. Information about some machines might have been lost during the recalculation or it might have been omitted intentionally. Management might have thought that depreciation had already decreased significantly due to the change in the useful life estimate and that decreasing the expense even further by allowing some off-book depreciation would go unnoticed. Audit Procedures The valuation assertion can be tested by performing substantive procedures on the depreciation charge. Many different substantive procedures may be implemented to ensure that the impairment is not materially misstated due to an error in the measurement. The audit should conclude that the useful life should have increased. Analytical procedures and surveys should be used to confirm this increase. The audit should examine the financial statements of similar companies with similar equipment and machinery. The comparison will determine whether Intel was justified in increasing the useful life. The audit should also question managers and find out why the increase was made and.
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