Question
You have been asked to carry out the audit of the property plant and equipment of Simons Engineering Limited for the year ended 31 March.
You have been asked to carry out the audit of the property plant and equipment of Simons Engineering Limited for the year ended 31 March. The draft accounts show the following movements on noncurrent assets in the year
Freehold Land & Buildings | Plant & Machinery | Motor Vehicles | TOTAL | |
Cost or Valuation | GHC | GHC | GHC | GHC |
At 1st April | 353,000 | 406,000 | 173,000 | 932,000 |
Additions | 292,000 | 86,000 | 65,000 | 443,000 |
Disposals | - | (29,000) | (47,000) | (76,000) |
At 31st March | 645,000 | 463,000 | 191,000 | 1,299,000 |
Freehold Land & Buildings | Plant & Machinery | Motor Vehicles | TOTAL | |
Depreciation | GHC | GHC | GHC | GHC |
At 1st April | 132,000 | 187,000 | 74,000 | 393,000 |
Charge for the year | 12,900 | 43,000 | 42,000 | 97,900 |
On disposals | - | (25,000) | (32,000) | (57,000) |
At 31st March | 144,900 | 205,000 | 84,000 | 433,900 |
NBV at 31st March | 500,100 | 258,000 | 107,000 | 865,000 |
During the current year ended 31 March the company purchased some land and built a new factory, which was completed during the year.
The company maintains a PPE register for all information related to property plant and equipment, and it depreciates its fixed assets at the following rates:
- Land and buildings 2% on cost
- Plant and machinery 10% on cost
- Motor vehicles 25% on cost
It is the companys policy to charge a full years depreciation on assets in the year of purchase and no depreciation in the year of sale.
Required;
(a) List and describe the audit tests you would perform to verify the amounts shown in property plant and equipment in the companys accounts for the current year ended 31 March.
(b) If the company did not maintain a PPE register, describe the problems you would experience and how it would affect your audit work and opinion
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