Chapter 13 - Substantive Procedures Flashcards
What are examples of tangible non-current assets?
Land, buildings, plant, vehicles, fittings, and equipment.
What assertion is at risk if a company does not actually own an asset?
Rights and obligations.
Which assertion is related to assets that do not exist or have been sold?
How do we test for this?
Existence.
We take the NCA register then go look for the NCA. We don’t look for assets then tick it off the list as we are are testing to see if it exists going the other way test completeness.
What is a potential misstatement risk for assets omitted from financial records?
Completeness.
We find the assets then tick it off the NCA register, we want to ensure the register is complete.
How could assets be misstated in terms of valuation?
By under or overvaluing them, due to incorrect revaluation policies or inappropriate depreciation charges.
What is the assertion we are testing for when looking at if an assets has been incorrectly presented in the financial statements?
Presentation and disclosure.
What are some sources of information for verifying tangible non-current assets?
What are some sources of information for verifying tangible non-current assets?
A: Non-current asset register, purchase (additions) and sales invoices (disposals), registration documents (rights+obligations), third-party valuations, physical inspection, and depreciation records (valuation).
What are examples of intangible non-current assets?
Licences, development costs, and purchased brands.
What assertion is at risk if expenses are capitalised as non-current assets inappropriately?
Existence.
What are some ways intangible assets might be misstated in valuation?
By inflating costs, not amortising appropriately, or not conducting impairment reviews.
What sources of information are used to verify intangible non-current assets?
Accounting standards, purchase invoices (purchased intangibles), client calculations and schedules (R&D), and specialist valuations.
When can we capitalised on R&D?
R&D = Research and development
Do not capitalise until we can market it then it becomes a NCA
Which three of the following might an auditor vouch when testing the rights and obligations of a company in respect of a vehicle?
A A purchase invoice
B A registration document
C A hire-purchase agreement
D An asset register
D An asset register
What is the journal entry for inventory?
DR Closing Inventory
CR COS
