ICQ5.2

Assume that a company has a manual for its financial accounting staff. The manual contains a number of steps that must be considered when finalising the Property, Plant & Equipment (PP&E) accounts at year-end. For each of the steps given below, identify the relevant assertion(s).

1.PP&E are not shown at a carrying amount greater than their recoverable amount in accordance with applicable accounting standards.

2.All PP&E assets in the balances were on hand at the end of the year.

3.PP&E balances include all new purchases made during the year.

4.Depreciation on PP&E assets has been properly calculated.

5.Any mortgages over PP&E are included in liabilities.

6.All PP&E assets on hand are owned.

7.Obsolete PP&E have been identified and revalued or written off, as appropriate.

8.The PP&E assets register has been totalled and the totals agree with the figures in the general ledger.

ICQ5.3

Assume that you have performed the following audit procedures for a company client. For each procedure identify the key assertion(s) being tested and why it was performed.

(a)Checked for cash receipts from debtors that were received by the client in the subsequent (next) accounting period.

(b)Reviewed cash payments made to suppliers by the client in the subsequent accounting period.

(c)Reviewed the estimated lives and depreciation methods used to arrive at the Accumulated Depreciation - Office Furniture account.

(d)Examined name on registration certificates for motor vehicles purchased during the year.

(e)Obtained an independent valuation of equipment held by the company interstate.

(f)Used a computer program to scan a file to determine that all documents in a numbered series have been accounted for.

(g)Traced a sample of the client's inventory items to their inventory stock listing.

(h)Examined a sample of paid invoices from suppliers to see who the invoice was issued to.

(i)Undertook an analysis of inventory turnover rates.

(j)Examined a sample of sales invoices for evidence of credit approval for the customer.