Movit Ltd (Movit) is a company which hires out heavy plant used in the construction industry. All plant is hired out with a driver who is responsible for ensuring that the plant is immobilized and stored securely when left on customers' sites overnight. Movit operates from ten depots throughout England. The directors of Movit have requested that your firm provides a report on the reliability of the internal control system in respect of the acquisition, custody and recording of its plant. They have provided you with the following information. All plant is uniquely numbered and logged in a plant register and integrated hire management system which can indi- cate the location of each item of plant at any point in time. Head office staff are responsible for maintaining the register, reconciling it each month with the nominal ledger and investigating any differences. They also undertake periodic physical checks involving checking items listed in the register to the asset and checking the asset to the register. The results of such checks are reported to the operations manager who authorizes any adjustments to the register on a standard form. The hire management system produces performance measures of usage and downtime for each item of plant. This is used by the operations manager to determine the need for additional new plant or replacement of existing plant. All acquisitions are processed by head office. A capital expenditure form has to be completed and supported by three quotations from suppliers and authorized by the operations and finance directors. The finance director also undertakes an appraisal exercise to confirm whether it is appropriate to lease or buy the plant and this is evidenced on the capital expenditure form. New plant is delivered directly to the depot requiring the item. Each depot manager confirms, by entering on to the system via a terminal at the depot, that the items have been received, physically checked and are of the correct specifi- cation. Industry regulations require plant to be subjected to regular maintenance checks. These checks are carried out by engineers who complete a standard checklist evidencing such checks and each depot manager is required to submit a copy of the checklist to head office staff who log the date of each check on the plant register. Head office staff are responsible for monitoring that timely checks have taken place, investigating any breaches of this policy and reporting their findings to the operations director.

Required: 

(a) Identify how Movit's internal control procedures meet the objectives of ensuring that:

(i) plant acquisitions are required and provide an acceptable rate of return.

(ii) plant is recorded, safeguarded and complies with laws and regulations, and

(iii) plant is appropriately valued.

(b) State the methods that you would use to obtain evidence that procedures established by the management are operating effectively and for each method provide two examples of how you would apply it to Movit.