To determine if the company used a systematic method to allocate costs over the assets' useful lives, auditors review depreciation policies in financial statement disclosures. Option B) is correct.
Financial statement disclosures provide detailed information about accounting policies, including depreciation methods employed by the company. These disclosures are an integral part of financial reports and offer transparency to stakeholders regarding the company's approach to recognizing and allocating depreciation.
By examining the financial statement disclosures, auditors can assess whether the company adheres to generally accepted accounting principles (GAAP) or other relevant accounting standards. Auditors scrutinize the consistency of the chosen depreciation method and evaluate its appropriateness in reflecting the economic reality of the assets' consumption over time. This helps ensure accurate financial reporting and provides stakeholders with a clear understanding of how the company allocates costs associated with its assets over their useful lives. The correct option is B).