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    178 views6 pages

    PPE - Lecture Notes PDF

    Uploaded by

    Rhegee Irene Rosario

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 6
    (Chapter 17 = Substantive Test of Property, Plant and E CHAPTER 17 Chapter 17 — Substantive Test of Property, Pant and Equipment Aste SUBSTANTIVE TEST OF PROPERTY, PLANT AND Tigisand “The now oF ha legal igo all he PE Oblgions fon the statement of financial postion at the EQUIPMENT (PPE) a Bierce dee 7a resentation and PPE an related accounts are propery aS ‘Capter Outn Dachorure described and ddosed” fr the nani ] Statements, including notes, in acerdance with 1 troduction | tone 2 Auditobjectives I 3 Primary subetnve procedures Liens, pledges, acuity interests and restrictions 4. Lapung schedule {PPE are ented nd propery dco 55. Sample audit program for PPE ._Summary of uit procedures per assertion Introduction Property, plant and equipment (PPE) are one of the most significant portions ofan enity’s nomcurrent asset hence, before acauiring propery, plant and equpmene they shoud be eareuly panned and analyzed ‘When planning for the audit of PPE, the auditor should consider that the amounts for ths PPE ts material w the statement of financial postion and ‘expect thatthe account balances do not necessarily change significantly {rom year to year. The auditor normaly assesses contol rik at maximum level and performs extensive substantive tests which emphasite the review ‘of sgnicant additions and disposals, and analvtical procedures to test the provisions or depreciation and depletion. In conjunction withthe audit of property, plant and equipment the auditors also obtain evidence about the related accounts of depreciation expense, Sccumulated depreciation, lease (rent) expense, impairment les (i any) {and repairs and maintenance expense Audit Objectives When auditing propery, plant and equipment, the principal objective for the substantive tate et determine the along {Assertion Category | ___ Account Balances Audi ‘AIL PPE on the statement of Financial position {including assets leased under nance lease ext ‘AI PPE owned or lesed under finance lese by ‘the entity atthe reporting dat is incuded on the statement of financial positon. PE is carved atthe appropriate amount taking no account the requirements of PAS 16 Proper, Plant and Equipment and PAS 36 Impairment of Existence Completes Valuation and ‘location ‘Audit of Property, Plant and Equipment (PPE) ‘he auditors primary substantive procedures for property, plant and ‘equipment wl typically include the flowing. 1. Obtaining 2 summary analysis of changes in property owned and reconcile with ledgers, 2 Vouching for additions and disposals (Induding retirements) of PE during the year Pihystal inspection ofmajr acqustion of PPE during the year Examining proof of ownership of PE, ‘Analyzing ease repair and maintenance expense accounts, ‘esting for the accuracy and reasonableness for, provision on depreciation or depletion; Investigating current ana potent mpatrment of Performing aalytial procedures to check for reasonableness of PPE and related expense reported inthe fnancal statements; and 9 Evaluating financial statement presentation and disosures for an Item of PPE inclding it elated revenue and expense ‘Aue procedures presnted In this twxtook merely lustre typical audit ‘rocedres (., primary substantive procedures) for audits of merchandising ‘ond manufactring ents. Ie is also primary designed for audits of ‘arpration: however some discussions are made for partnership and sole Droprietorship businesses. In actual practic audi pregrams must be talored tweach clients risk and Internal control. The aude procedures comprising dit programs may substantial vary from engagement tthe net “Asertions mentioned inthis textbook relate to primary asertion addressed by the aut procedures discussed. However, some other assertions may also Be audresed. ena Snape 17 = Substantive Test of Property, Plant and Equipment ‘Reconciliation of Subsidiary Ledger with General Ledger Belore making ® detalled analysis of changes in PPE Decounts during the year, the audltor should obtain 3 Schedule of property, plant and equipment, including 4 Capitalized leases and. related addiuons, disposal etirements, reclasifcatons and depreciation (PPE subledget) and agree balances to the respective general ledger accounts. Reconation ofthe subsidiary ledgers withthe controling accounts canbe performed withthe use of generalized aut software “The reconlation schedule normaly includes the following items 1A description ofthe astet or asset dassifiations; 2. Gost for each asset of asset clasication, including the opening balance at the beginning of the year, addtions and_dlsposals, Fetirements andthe balance atthe endo the year 8. Accumulated deprecation, showing: {Balance atthe beginning othe year: Bh Debits to accumulated deprecation due to transfers,

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