- The auditor normally examines supporting legal and contractual documentation to

verify the client’s legal rights to these assets

Classification
- The auditor’s concern with classification is that the different types of intangible
assets are properly identified and are accounted for separately.

AUDITING THE PROPERTY MANAGEMENT PROCESS

- Types of Transactions:
- Acquisition of capital assets for cash or other nonmonetary considerations.
- Disposition of capital assets through sale, exchange, retirement, or abandonment.
- Depreciation of capital assets over their useful economic life.
- Leasing of capital assets.
PROPERTY MANAGEMENT PROCESS – INHERENT RISK ASSESSMENT
The following three inherent risk factors classified as operating characteristics require
consideration by the auditor:
- Complex accounting issues.
For example, in the case of a lease transaction the auditor must evaluate the client’s
decision either to capitalize the lease or to treat it as an operating lease. Because of the
complexity of the capitalization decision and the subjectivity involved in assessing the
capitalization criteria, it is not uncommon for such transactions to be accounted for
incorrectly by the client.
- Difficult-to-audit transactions.
However, transactions involving donated assets, nonmonetary exchanges, and self-
constructed assets are more difficult to audit.
- Misstatements detected in prior audits
If the auditor has detected misstatements in prior audits, the assessment of inherent
risk should be set higher than if few or no misstatements had been found in the past.
PROPERTY MANAGEMENT PROCESS – CONTROL RISK ASSESSMENT
- Occurence and Authorization
- Completeness
- Segregation of Duties
PROPERTY, PLANT, AND EQUIPMENT – SUBSTANTIVE PROCEDURES
- Substantive Analytical Procedures
The following list provides examples of substantive analytical procedures that can be
used in the audit of property, plant, and equipment: