Page 68 - eBook Audit Of Financial Statement Components

14. As part of your work as external auditor you are reviewing the non-

current assets audit programme of the internal auditors and notice
that the basis of their testing is a representative sample of
purchase invoices. They use this to test entries in the non-current
assets register and the updating movements on the annual budget.

State a more appropriate test to prove completeness of the non-
current assets records, including the non-current assets register

A more appropriate test would be to make the selection from
goods received notes (GRNs), as the issue of a GRN is normally the
point at which liability is accepted and is in any event the document
used to update the non-current assets budget. In other words, it is
important to identify your audit objective and then to decide on
what sample will be the most appropriate to aid you in meeting
that objective.

The GRNs would be traced to the recorded purchase invoices to
ensure that the latter were complete and then to the entries in the
non-current assets register and to the updating entries in the
budget to ensure that these too were complete.

15. List FOUR assertions relevant to the audit of tangible non-current
assets and state one audit procedure which provides appropriate
evidence for each assertion.

Completeness – ensure that all non-current assets are recorded in
the non-current asset register by agreeing a sample of assets
physically verified back to the register.

Existence – ensure non-current assets exist by taking a sample of
assets from the register and physically seeing the asset.

Valuation and allocation – ensure assets are correctly valued by
checking the reasonableness of depreciation calculations.

Rights and obligations – ensure the company owns the asset by
seeing appropriate document of ownership for example, a
purchase invoice.

Presentation and disclosure assertions – ensure all necessary
financial statements disclosures have been made by reviewing the
financial statements and ensure non-current assets are correctly
categorised in those financial statements.