Auditing practices used by Micro Enterprises

According to Ali (2019), auditing involves reviewing and inspecting business's accounts in order to
determine if they comply with the laws, guidelines, and rules and whether the accounts are arranged
well.

Ejembi (2004), itemized some of the doings of audit practices as follows: check wages and salaries
vouchers to determine accuracy and correctness; examine the purchases daybook, sales day book,
returns inward and returns outward day books to confirm correct recording and posting to the ledger
accounts; inspect ledger accounts to ensure correct balancing; audit trading account to confirm
correctness in form and content and examine income statement to determine that net profit for the
year under review is correct.

Auditing practices in relation to SMEs, according to Ejembi involves the income statement, balance
sheet, and assessment of the sources of funds, with an intention to ascertaining if the transactions
address a fair and true view of the situation of affairs within a specified time period, usually on monthly
basis or at year end of the business organization.

Depreciation Practices used by Micro Enterprises

Assets depreciation is very essential in SMEs not because of the effect of reduced taxation but it will also
help to determine the useful life of an asset and when to replace it. Depreciation is the system of
rationally and systematically distributing the cost of a long term asset over its useful life. It is very
important to perceive that depreciation is a cost allotment, not a process of asset appraisal (Ali, 2019).

For a business asset to be depreciable, Osuala (2014) explained that it must meet three requirements: It
must be employed in the business or used to produce income; its useful life must be determinable, and
it must be longer than one year; and it must be property that wears out, decays, is used up, becomes
obsolete, or loses value from natural causes.

According to Fred, Robert and Patricia (2016), the simplest and most practical method of computing
depreciation is the straight-line method. It is the easiest to use and understand, and it does a good job
of matching depreciation expense to revenues when assets are used evenly over their useful lives.