A4 - Fixed Assets, Payroll, and Finance Cycle

Question 1

What should auditor do to test for unrecorded fixed asset retirements (existence)?

Answer 1

• select older fixed assets from the sub-ledger then locate those assets
• inspect the property ledger and the insurance and tax records, and then tour the client’s facilities

Question 2

what are the source docs to book for FA?

Answer 2

• source docs: purchase requisition to receiving report to vendor invoice to FA sub-ledger

Question 3

what are the source docs to book for payroll?

Answer 3

source docs from time cards to payroll register

Question 4

how to test completeness for equity? this could use for testing existence

Answer 4

• If client uses a stock transfer agent: third-party confirmation should be used
• If client does not use stock transfer agent: primary source of evidence is the stock certificate book and compare with general ledger
• for existence only: vouch transactions recorded to the current board meeting periods or new debt agreements