審計(jì)學(xué)英文教學(xué)課件：Chapter 17 Tests for PPE

1、Chapter 17Tests for PPE1Lecturer 陳丹Accounting Treatment for PPE2Supporting documentationsDay bookNon-current asset ledgerNon-current asset general ledgerNon-current asset registerSchedule of PPE (Figure 1)F/SFigure 1 Schedule of PPELandBuildingsPlant and MachineryMotor VehiclesTotalCOSTAt year end 2

2、012AdditionsDisposalsAt year end 2013Accumulated DepreciationAt year end 2012Charge for the yearAt year end 2013Net Book ValueAt year end 2012At year end 201334EXISTENCECOMPLETENESSVALUATIONRIGHTS AND OBLIGATIONSADDITIONSDISPOSALSTESTS FOR PPEPhysically inspect assets in the non-current asset regist

3、er, concentrating on high value items and new additions, to confirm they exist and are in use. 5EXISTENCETESTS FOR PPETrace a sample of assets physically present at the entitys premises to the non-current asset register to ensure that these are included.Reconcile the schedule of PPE with the general

4、 ledger.Reperform the reconciliation of the non-current asset register to the general ledger, investigate any differences.Review the repairs and maintenance expense account in the statement of comprehensive income for items of a capital nature.6COMPLETENESSTESTS FOR PPEAgree the revalued amounts to

5、a valuation report, for a sample recalculate the revaluation gains or losses. Assess the reasonableness of valuation, considering experience of the valuer, independence, scope of work , assumptions used and valuation bases are in line with accounting standards.7TESTS FOR PPEVALUATION (REVALUATION)Re

6、view depreciation policies for reasonableness by comparison to prior year, industry practices, the entitys replacement policy and the gains/losses arising on disposal of assets.For a sample of assets recalculate the depreciation charge for the year and agree to the non-current asset register.Perform

7、 a proof in total calculation of depreciation, considering the timing of additions and disposals and compare this expectation to the actual charge, and investigate any significant differences.8TESTS FOR PPEVALUATION (DEPRECIATION)Inspect title deeds and land /vehicle registration documents to verify

8、 ownership of property.For a sample of additions agree to purchase invoices in clients name to verify invoice relates to the entity.Review any new lease agreements to ensure assets are correctly treated as finance or operating leases.9TESTS FOR PPERIGHTS AND OBLIGATIONSFor a sample of new additions

9、in the non-current asset register: agree to board minute or capital expenditure forms for evidence of authorisation by a responsible official.agree to purchase order, supplier invoice and GDN to confirm occurrence.10TESTS FOR PPEADDITIONSAgree a sample of recent GRNs to non-current asset register to

10、 confirm each addition is recorded.Cast the list of additions and agree to the non-current asset general ledger to confirm completeness.11TESTS FOR PPEADDITIONSSelect a sample of additions from non-current asset registers and agree cost to supplier invoice to confirm valuation.agree the additions fr

11、om non-current asset register to supplier invoices in clients name to confirm rights and obligations.12TESTS FOR PPEADDITIONSReview the list of additions and verify that they relate to capital expenditure items rather than repairs and maintenance to confirm additions are correctly classified.For a s

12、ample of additions recorded in non-current asset register physically inspect them to confirm existence.13TESTS FOR PPEADDITIONSObtain a list of disposals, agree disposals with sundry sales invoices and title transfer documentations and agree receipt on sale to the cash book to confirm occurrence.Agr

13、ee a sample of sundry sales invoices to non-current asset register to confirm each disposal is recorded.Cast the list of disposals and agree to the non-current asset general ledger to confirm completeness.Recalculate the profit/loss on disposal and agree to the income statement to confirm accuracy.1

14、4TESTS FOR PPEDISPOSALSError Reason for lack of marks Ensure that additions are correctly includedIt is objective rather than substantive procedureCheck accounting records to ensure correct treatment of disposalstoo vague as it does not explain how we gain comfort that disposals have been recorded c

15、orrectlyPhysically verify on the factory floor that an asset has been disposed of Unrealistic test. if its been disposed of then how can it be physically verified! Focus on whether the asset has been disposed of for the best possible price This is a concern of management and not of the auditor 15Err

16、or Reason for lack of marks Ensure that additions are correctly includedIt is objective rather than substantive procedureCheck accounting records to ensure correct treatment of disposalsToo vague as it does not explain how we gain comfort that disposals have been recorded correctlyPhysically verify

17、on the factory floor that an asset has been disposed of Unrealistic test. if its been disposed of then how can it be physically verified! Focus on whether the asset has been disposed of for the best possible price This is a concern of management and not of the auditor Which of the following tests wo

18、uld provide audit evidence as to the existence of a tangible non-current asset?Inspect board minutes approving authorisation of the assetPhysically inspect the assetReview the non-current asset register for inclusion of the assetInspect the invoice and purchase order documentation of the asset16BIns

19、pecting the title deeds of a building provides audit evidence concerning which one of the following financial statement assertions?ExistenceValuationRights and obligationsCompleteness17CWhich one will be a good starting point of the test for completeness of the non-current assets records?Supplier in

20、voiceGRN18B“For a sample of assets reperform the depreciation calculation charge for the year” is a _ test.Reperformance Recalculation19B“Perform a proof in total calculation of depreciation” is a(n) _ test.Analytical procedureReperformance RecalculationInspection20A21Past Exam QuestionsJune 13 Q4aJ

21、une 12 Q1bDec 10 Q4cDec 09 Q3cDec 08 Q2cJune 06 Q2aJune 05 Q3bJune 06 Q2a Good or Poor Answers? Examine board minutes.Cast the ledger and agree to general ledger.Agree the opening balances of railway trucks to last years closing balances.Agree depreciation rate of railway trucks to last years F/S.Ag

22、ree assets from register to ensure they physically exit.22June 06 Q2a Good or Poor Answers? During stock check, obtain a sample of railway trucks and agree back to non-current asset register to confirm existence of recording of trucks in the ledger.Verify that railway trucks have been valued at the

23、lower of cost and NRV.Employ a specialist valuer to ensure that any permanent diminution of value is accounted for in the railway trucks.23June 06 Q2a Good or Poor Answers? Poor answerWeaknessImprovement requiredMark-earning answerExamine board minutes.It is not clear why the boar minutes are being

24、examined.As railway trucks are a large item, mention for purchase of the trucks.Examine board minutes for authorising the purchase of trucks.24June 06 Q2a Good or Poor Answers? Poor answerWeaknessImprovement requiredMark-earning answerCast the ledger and agree to general ledger.It is not clear which

25、 ledger is being cast or why.Show that the answer focuses on railway trucks, and identify which ledgers are being used.Cast the non-current asset ledger, agree total of railway trucks to the general ledger.25June 06 Q2a Good or Poor Answers? Poor answerWeaknessImprovement requiredMark-earning answer

26、Agree the opening balances of railway trucks to last years closing balances.The question states that there were no railway trucks last year new addition this year.That standard opening balance answer shows that the candidate has not actually considered the scenario information the answer as it stand

27、s is therefore not relevant . Either omit from answer or make relevant.Discuss with the directors to confirm that railway trucks were a new asset addition this year and there should be no opening balance.26June 06 Q2a Good or Poor Answers? Poor answerWeaknessImprovement requiredMark-earning answerAg

28、ree depreciation rate of railway trucks to last years F/S.This test is not possible there were no railway trucks last year.Ensure that the depreciation rate agreed with evidence that is actually obtainable.Agree depreciation rate of railway trucks chosen by the directors with external evidence such

29、as similar companys F/S.Obtain representation letter confirming that the directors consider the new rate to be appropriate.27June 06 Q2a Good or Poor Answers? Poor answerWeaknessImprovement requiredMark-earning answerAgree assets from register to ensure they physically exit.It is not clear what is b

30、eing audited or how the test is being carried out.State that railway trucks are being audited and that the existence check is being carried out.For a sample of railway trucks from the register, confirm existence by physically seeing the trucks.28June 06 Q2a Good or Poor Answers? Poor answerWeaknessI

31、mprovement requiredMark-earning answerDuring stock check, obtain a sample of railway trucks and agree back to non-current asset register to confirm existence of recording of trucks in the ledger.There is only one word wrong with this statement the test is actually confirming the completeness asserti

32、on not existence.State completeness is being tested.During stock check, obtain a sample of railway trucks and agree back to non-current asset register to confirm completeness of recording of trucks in the ledger.29June 06 Q2a Good or Poor Answers? Poor answerWeaknessImprovement requiredMark-earning answerVerify that railway trucks have been valued at the lower of cost