A copy of the auditor’s working paper for auditing additions and disposals relevant to the balance of property, plant, and equipment (PPE) for the client New Millennium Ecoproducts is presented in Figure 11.4.

Required

a. What assertions are relevant to (i) additions and (ii) disposals of PPE?

b. Find the details of the additions. Explain the diff erence between the two items, particularly with respect to depreciation.

c. Find the details of the disposal. How much was the gain or loss on sale? Why is the auditor interested in the amount of the gain or loss (explain the comment by the auditor about the disposal in the working paper)?

Figure 11.4

Transcribed Image Text:

New Millennium Ecoproducts 31/12/20 CLIENT: Period-end: W&S PARTNERS Currency/unit: $000 Debit/ K02 - ADDITIONS AND DISPOSALS Reference K02 Section 1: Additions Depreciation Starting Date Asset TM/ TM/ Life Asset Code Description (years) Amount Category Ref Ref Delivery van (15) Equipment 700025 01/05/20 10 2750 N/A CPX 120 Asset under construction N/A N/A 500 Section 2: Disposals Gross Book Accumulated Net Book Selling Depreciation Gain/(Loss) Price TM/Ref on Disposal Description Category |Delivery van Equipment Asset Code Value Value (65) 600662 280 140 75 420 Key to audit tickmarks: V Agrees to purchase invoice * Agrees to sales invoice and receipt of payment c OK depreciation starting date appears reasonable Comments: V No issue from testing of additions V Loss on disposal of item tested is material and does not confirm relevance of depreciation rate used by company.