Property, Plant, and Equipment Audit Table
Audit Procedures for Property, Plant, and Equipment
The audit procedures involve examining the client’s property, plant, and equipment accounting records to ensure they are correct and complete. Reviewing the asset registry, trial balance, and other pertinent financial statements will be required for the net value of the property. For instance, the credit entry for building improvements is 641,403.15. The rules and procedures are checked to verify that they are followed. The auditor should test the client’s property, plant, and equipment controls to determine that they are enough through depreciation computations, physical inventory counts, asset additions, and asset disposals.
The audited balance for total accumulated depreciation in 2006 is 1,285,212.00; this was much less than in 2007, which was 2,088,735.46. For accuracy, thorough testing on the facilities, machinery, and equipment is conducted. Comparing the client’s records against outside sources, like tax records or appraisals, is done. Finally, the client’s depreciation estimations, methodology, and disclosures are analyzed.
The Financial Statement Assertion Applicable to Property and Equipment
The financial statement assertion applicable to property and equipment is a properly stated net book value. The audited balance of the net book value in 2006 is different from 2007 and also differs from the unaudited balance. All depreciation expense has been properly recorded, and the assets are reflected at their correct historical cost. For instance, the audited balance of land in 2006 was 1,387,544.10, whereas in 2007, is 1,387,544.00. It is crucial to ensure that the assets listed on the balance sheet genuinely exist and are owned by the company, especially regarding property and equipment. For instance, a long-term asset land has been assigned different values: Plot – 93 BB and Plot – 93 BA. Additionally, it guarantees that any liabilities related to the assets and machinery are accurately recorded.
Internal Controls to Use for Property, Plant, and Equipment
Internal controls include keeping thorough records of all property, machinery, and equipment to track the company’s assets effectively. The track of machinery and equipment has been kept, and it is noticed that the audited balance in 2007 is three times more than that of 2006. When developing internal control, duties should be separated and alternated among the employees. The purchase, sale, and transfer of the real estate, machinery, and equipment are then authorized, and documents are recorded and maintained. Lastly, the independent performance reviews are conducted by staff members, hence contributing to ensuring the accuracy of accounting data and the effectiveness of operations. Every piece of property, machinery, and equipment is therefore protected, and records are reviewed regularly.
Considerations to Address When Auditing, Property, Plant, and Equipment
An auditor should consider confirming that the assets are genuinely owned by the company and exist. It is important to guarantee that their existence and ownership are correctly documented and registered. One should examine invoices, contracts, and other paperwork that will help with this. Depreciation schedules are examined for this purpose, and the carrying value of the assets is compared to similar assets. Examining signs of impairment is necessary because if there are any, the asset may need to be written down to its fair value, which could substantially affect the financial statements. The audited balance of construction in progress in 2006 was not recorded. It is crucial to check the accounting for any significant acquisitions, sales, or revaluations of the assets over the period to ensure that these transactions have been properly recorded. It is accomplished by checking the transactions’ journal entries to ensure they adhere to widely accepted accounting rules.
The Accounting Principles to Consider for Property, Plant, and Equipment
The accounting principles to be considered are how assets are recognized, how their carrying values are determined, and how depreciation and impairment losses are acknowledged. The item should be recorded in the accounting records at its original cost, including any ancillary charges like shipping and installation, offering a dependable and impartial foundation for asset valuation. The costs and income related to an asset are recorded to guarantee that costs are fairly matched to the income they contributed. Based on the depreciation concept, assets are written off throughout their useful lives. In this case, we find two useful years written, 2006 and 2007. The price of an item should be spread out across the time it is used, ensuring that assets are priced fairly on the balance sheet.