Assertions - PPE

Question 1

Completeness - PPE

Answer 1

Analytical Procedures.

Reconcile subsidiary ledgers and general ledgers.

Vouch additions to PPE to see if any were actually non capital items.

Analyze repairs and maintenance to determine if any should have been capitalized.

Trace the serial numbers on equipment to a nonissuer’s sub-ledger.

Question 2

Accuracy - PPE

Answer 2

Include amounts and classification in management representation letter.

Compare G/L balances to financial statements.

Question 3

Valuation/Allocation - PPE

Answer 3

Are PPE reported as Historical cost - accum depreciation??

Inspect records of purchases.

Vouch additions and disposals.

Test depreciation.

In auditing intangible assets, an auditor should review or recompute amortization and determine whether the amortization period is reasonable.

Question 4

Existence - PPE

Answer 4

Do assets reflected in PPE actually exist?

Inspect plant additions. Vouch additions by examining supporting documents and inspecting the physical documents

Question 5

Cutoff - PPE

Answer 5

Test additions and disposals near year end.

Question 6

Rights/Obligations - PPE

Answer 6

Examine titles and leases.

Inspect insurance policies and property tax records.

Question 7

Occurrence - PPE

Answer 7

Test authorization, execution, recording and custody.

Question 8

Classification/Understandability - PPE

Answer 8

Is balance of PPE in noncurrent section? Are adequate disclosures presented for methods of depreciation, comittment of assets and capital lease terms?

Read financial statements.

Make inquiries of management about disclosures and other reporting issues.

Determining that proper amounts of depreciation are expensed.