Chapter 8 - Non Current Assets

Question 1

Name the two elements that need to be tested

Answer 1

Cost and accumulated depreciation

Question 2

Cost of the asset

Answer 2

Cost = all expenditure to being into use

Auditor must check invoices to make sure no revenue items have been capitalised.

Tax has been treated correctly

Question 3

Depreciation checks

Answer 3

Subjective area set by the directors of the company - so auditor needs to review the policy for reasonableness.

Recalculate depn charge for a sample of assets.

Question 4

Revaluation of assets

Answer 4

Companies may revalue there assets instead of using the historical cost.

Auditors must check all revaluation in the period for reasonableness.

Can get expert advice to provide assurance.

Question 5

Disposals

Answer 5

If profit/loss on disposal of assets is material then the auditor must check sales invoice and recalculate the profit or loss

Question 6

Other tests for NCA

Answer 6

Cast and agree asset register to nominal ledger.

Sample of assets:
physically verify them from register - existence.
Trace them to the register - completeness
Check the appearance of the assets - valuation
Check the documentation, land reg, vehicle reg - rights

Revenue the repairs and renewals account ensure no capital items have been expenses - completeness.