ACC701: Auditing Topic: Auditing Property Plant and Equipment Question 1 Identify and describe at least six procedures the audit team may perform in order to determine potential obsolescence of items in the inventory balances. .Question 2 The following deficiencies occurred during an audit of inventory: a. The audit firm "left the extent of various observations testing to the discretion of auditors, not all of whom were aware of significant audit conclusions which related directly to the extent of testing. Observations of inventory counts at year end were confined to six locations (representing about 40% of the total inventory in over 300 locations) as opposed to nine in the preceding year. The field auditors did not adequately control the inventory tags and the auditor did not detect the creation of bogus inventory tags which were inserted in the final inventory computations.' b. The company did not use pre-numbered purchase orders and shipping documents. c. Because the company did not provide sufficient invoices as requested, the auditors relied primarily on vendor catalogues, price lists and vendor invoices to test the accuracy of the company's inventory pricing representations. Required: For each of the deficiencies identified, indicate the appropriate action that should have been taken by the auditor. Question 3 Discuss at least three potential fraud schemes related to property, plant and equipment. Question 4 Assume that an auditor determines that a client's policy related to recording repairs and maintenance is reasonable, but the auditor has concerns about whether the policy is adhered to. What might cause such concerns and how will the auditor adjust the substantive procedures to be performed ? Question 5 Rivers & Associates is the auditor for a manufacturing company with a balance sheet that includes the line item 'Property, plant and equipment'. The company has noted the following events in relation to 'Property, plant and equipment'. 1. A block of land was acquired during the year. The land is the future site of the client's new headquarters, which will be constructed in the following year. 2. Clearing costs were incurred to make the land ready for construction. 3. During the land-clearing process, timber and gravel were recovered and sold. Required: Identify the audit objectives (assertions) for 'Property, plant and equipment', and indicate the main substantive tests relating to each