Final answer:
The smaller proportion of audit time on PPE is due to its stability, the infrequency of transactions, and the lesser importance of proper cutoff of YE transactions for long-term assets compared to current ones.
Step-by-step explanation:
The factors leading to a smaller proportion of total audit time spent on property, plant, and equipment (PPE) compared to current assets are:
- There is usually little change in property accounts from year to year, indicating a degree of stability that lowers the audit risk related to these accounts.
- PPE has a high dollar value but typically involves few transactions, which means there are fewer individual instances to examine.
- The proper cutoff of year-end (YE) transactions is of lesser importance for PPE when compared to current assets, due to their long-term nature and typical depreciation methods.
Meanwhile, while a YE cutoff error may significantly impact net income for the year, this does not necessarily imply that more audit time will be allocated to PPE since it is tied more to revenue recognition and current assets.