PPE Flashcards
best way to test PPE
verify each transaction
TRICK:
FA workpaper
includes expense and asset on same WP
Extraordinary repairs on assets lead to
debits to accumulated depreciation
depreciation expense assertion
classification and understanding
valuation and allocation
exception:
unrecorded retirements
TEST LIKE EXISTENCE ASSERTION
LIENS ON PPE RECORD ISSUE
LIENHOLDER IS INSURANCE BENEFICIARY THEREFORE HOLDS THE DOCUMENTATION FOR INSURANCE POLICY
change is estimate
PROSPECTIVE
HOW TO RETIRE PLANT ASSETS
DEBIT ACCUMULATED DEP
CREDIT ASSETS
investment TRANSFERS between CATEGORIES
valuation & classification
EQUITY METHOD OWNERSHIP AUDITOR RELIES ON
INVESTEES FS
DERIVATIVES
Auditor verifies applicable framework
completeness derivatives
confirm with outside party whether or not side agreements have been made
notes or accounts receiavble
CONFIRMATION IS NOT NECESSARY BECAUSE IT DOESN’T ESTABLISH CONDUCTIBILITY
DERIVATIVES IMPAIRMENT LOSS
YES
AUDIT PLAN FOR INVESTMENTS
ANALYTICAL
RECOMPUTE INTEREST AND DIVIDENDS
securities verified at subsequent date
must be sealed off because of the threat that they maybe used to cover cash shortage
debenatures
bonds backed by general credit of issuer
Trustee carries out all bond activities
noncurrent debt
current debt
auditor responsibility
1 -(1) determines that all noncurrent debt has been recorded and constitutes bona fide liabilities;
(2) verifies that federal and state laws relevant to financial reporting have been complied with;
(3) determines that premium, discount, interest payable, and interest expense are accurately recorded;
(4) monitors compliance with debt contracts; and
(5) reviews proper presentation and disclosure in the financial statements.
6 -examining bond trust indentures (contracts)
Current must have a lawyers opinion
balloon payment
applies to a subsequent year
private placement
issues related to
no bond trustee
issues with receiving and recordance
auditor verifies affiliates indebtedness by
board minutes and management rep letter
issuance of bonds can be authorize through
board minutes because it provides the maximum amount of indebtness a company is willing to have
if the trustee versus minutes is a decision ALWAYS GO WITH MINUTES FOR AUTHORIZATION
LEAST AMT OF AUDIT TIME
OWNERS EQUITY SECTION
HOW TO AUDIT RE
VERIFICATION FOR AUTHORIZED DIV
EMPHASIS FOR RE
BOARD MUST APPROVE CAPITAL TRANSACTIONS SUCH AS STOCK AND DIVIDENDS
DIVIDEND PAYMENT TO STOCKHOLDERS AT
RECORD DATE
CAPITAL STOCK TEST NOT NEEDED
DETAIL TESTING B/C
1 - DIVIDENDS ARE USUALLY IN SMALL AMOUNTS
2 - INDEPENDENT FINANCIAL INST. ISSUES THE DIVIDENDS
how are manufacturing costs expensed
direct labor goes to WIP
Therefore payroll expense for hours is sent to INVENTORY
VALUATION AND ALLOCATION INVESTMENT
SUB FINANCIAL STATEMENTS
EQUITY TRACING CLOSING BAL ASSERTION
VALUATION/ALLOCATION
