Study unit 16.6 Flashcards
What is the rights and obligations with regards to auditing PPE
Confirmation of ownership - inspect documents
Capitalisation of assets
Procedures to determine if assets are encumbered
Assets owned beginning of year - determine change in rights
*enquire from management
*inspect director’s minutes
Addition - inspect purchase docs - name of client
*vehicles - registration docs
*land - title deed
*other - invoices
Capitalisation of leases - inspect lease agreements
Assets encumbered - offered as security - inspect
*loan agreement
*bank confirmations
*minutes of management meeting
What is the existence with regards to auditing PPE
Physical inspection of assets
Procedures to identify unrecorded sale of assets
*analyse sundry revenue account - confirm with supporting docs
*enquire from management whether major assets acquired replaced old asset
*inspect insurance docs for removal of assets
*analyse related expenses - reduction in motor vehicle cost/property rates
Reconcile disposals per capital budget with list of disposals
What is the completeness with regards to auditing PPE
Inspection of repairs and maintenance - identify items to be capitalised
Trace assets from premises to asset register
Inspect rental lease agreements - items to be capitalised
What is the accuracy, valuation and allocation with regards to auditing PPE
Cost price *arithmetical accuracy of asset register *transaction audit procedures on assets purchased and sold Provision for depreciation Impairment
What is the generic audit procedures with regards to intangible assets
Reperform castings of schedule of costs and agree total to balance in G/L
Request management to include reference to the assertions pertaining to the intangible asset in written representation letter
What is the existence procedures with regards to intangible assets
Inspect minutes board meeting - decision to acquire rights/license
Inspect agreement to ascertain that exclusive rights are granted to our client
What is the procedures with regards to the probability of intangible assets
Enquire from management reasons for confidence bid successful or entrance to market
Inspect bid documentation/market surveys
Inspect correspondence with contracting party
Inspect industry publications/newspapers - progress awarding contracts/possibility of entrance to new market
What is the procedures with regards to future economic benefits of intangible assets
Evaluate professional competence of third party and staff - inspecting evidence of profession certification
Evaluate objectivity of third party - enquiries management and staff of third party
Evaluate scope of work is adequate - inspection of terms of reference/engagement letter of third party
Evaluate appropriateness of work
*reperform arithmetic computations
*evaluate reasonability of assumptions
*evaluate completeness and reliability of source data
What is the procedures with regards to rights of intangible assets
Inspect contract - name of client
Inspect invoices capitalized - name of client
What is the procedures with regards to accuracy, valuation and allocation of intangible assets
Obtain detail cost listings - reperform casting - agree total of cost listing to the amount on schedule
Inspect supporting invoices for items on detail cost listings and agree amount of invoice to that of cost listing
Consider any impairment on the carrying amount of intangibles
What is the audit procedures with regards to rights and existence of share investments
Unlisted
*inspect and count share certificates - description, name of company number of shares; made out in name of client; authentic
Listed
*confirm ownership direct from client’s brokers
Direct confirmation from bank or third party if held as security
Enquiry and discussion with management to confirm intention is to hold for long term
What is the audit procedures with regards to accuracy, valuation and allocation of share investments for the current year movement
Occurrence
*inspect minutes investment committee meetings for approval of purchase or sale
*listed - inspect brokers’ notes for evidence of purchase or sale and confirm details
*unlisted - inspect contracts and correspondence for evidence of purchase or sale of shares and confirm details
Accuracy, cut-off and classification
*confirm details of cost, selling price with brokers’ notes/sale agreements
*reperform casts and calculations - profit or loss on sale
*inspect dates of documentation to confirm transaction has been recorded in correct period
*trace postings to general ledger accounts
What is the audit procedures with regards to accuracy, valuation and allocation of share investments for the closing balance
Listed
*confirm market value at year-end by inspection of JSE publications
*reperform calculations - number of shares x market price
Unlisted
*obtain independent fair valuation at year-end
*obtain directors’ valuation and assess the reasonableness by inspection of an enquiry of calculation method and assumptions used, reperformance of calculations and inspection of latest financial statements of investee
Enquire from financial director if changes in value are categorised as financial assets at fair value through profit and loss, or financial assets at fair value through other comprehensive income
If recognised through other comprehensive income - confirm directors have taken and minuted the decision that share investment is not held for trading
What is the procedures with regards to completeness of share investments
Compare current year-end schedule to that of the prior year and for any decrease in holdings - confirm there is a disposal recorded under current year movement
Include written representation letter from management the completeness of investments held
Match dividends received to list investments
Obtain summary of dealings in listed shares from brokers
