QUESTION 2

CLO5:AUDITING CAPITAL ACQUISITIONS AND REPAYMENTS

The Government has decided to offer a grant to all small hotels that have a 100 room capacity or less.

The Hotel Mingle's audit programme is currently being prepared by the audit senior.

While reviewing the notes from the Finance Director the following issue was noted:

Depreciation

Major renovation work was carried out on one section of the building and the company purchased major leisure equipment.

The Finance Director has proposed that the new leisure equipment be depreciated over ten years using the straight-line method.

Required:

Concerning the issue raised, describe substantive procedures to obtain sufficient and appropriate audit evidence.(10 marks)

Support your answer with information from scholarly sources.

b. TheExternal Auditors of Mutual Life Ltd. are planning to use its internal auditors' work for the audit.

They have to do some checks to include the internal auditors' reporting arrangements and qualifications.

The external auditors did atest of entries in the non-current assets register and the updating movements

on the annual budget were done. The external auditors having satisfied themselves with the quality of

work that was done by conducting the entries.

Required:

In addition to the above test, state other types of tests that could be used to prove the completeness of the non-current assets records, including the non-current assets register. (10 marks)

c) In auditing tangible non-current assets, audit procedures and assertions are required to provide appropriate

evidence for each assertion.

Required

Outline FOUR (4) assertions relevant to the audit of tangible non-current assets and state one (1) audit procedure which provides appropriate evidence for each assertions(5 marks)