AUE3761 ASSIGNMENT 03 OF 2021
1. Substantive audit procedures to obtain audit evidence in respect of the
occurrence assertion for additions and disposal of mini trucks
Additions
➢ Select a sample of additions of mini trucks from the fixed asset register and trace
them to capital budget, minutes of directors’ meetings and purchase requisitions
for evidence of authority for the acquisition of the mini trucks;
➢ Inspect mini trucks acquired during the year and cross-reference description,
serial number, etc., to purchase invoices, receipts obtained from suppliers or
purchase contracts;
➢ Inspect the asset register and purchase documentation and verify that the
registration numbers of additions are not the same as the ones for mini trucks
which were already available prior to current year;
➢ Inspect the purchase invoice or purchase contract to confirm that it they are
made out to Living Well (Pty) Ltd and is for the selected mini trucks and is
signed; and
➢ Inspect payment records to confirm that payment was made for the mini trucks.
Disposals
➢ Inspect the disposal documentation, such as directors` meeting minutes used to
approve the disposal for an authorising signature;
➢ Trace the disposal by reference to the capital budget, confirm authorisation for
the disposal of the mini trucks;
➢ Trace the proceeds of the sale to the receipts` records or bank stamped deposit
slip or bank statement;
➢ Inspect the receipts and contracts of sell and confirm that they were generated
by Living Well (Pty) Ltd;
➢ Inspect the asset register and verify if the disposed assets were disposed in the
asset register and inspect a sample of mini trucks and verify that they were not
recorded as disposed.
FOR ACCADEMIC NEEDS CONTACT 065 160 9781/
, Substantive audit procedures to obtain audit evidence for the accuracy,
valuation and allocation relating to depreciation of mini trucks
➢ Confirm by enquiry of the directors that the accounting policy for depreciation
relating to mini trucks is consistent with prior year using the straight - line method
over an estimated useful life of five years;
➢ Where there is a significant such as major service to be done periodically on the
mini trucks, confirm that the allocation total of cost to the components is fair and
reasonable by enquiring with management or supplier and scrutiny of purchase
invoices and purchase contracts;
➢ Obtain a representation letter from management, confirming that they have
reassessed the useful life and residual values at year end in view of the
increased frequency of trips for the mini trucks;
➢ Review the changes (if any) to the useful life and residual values of the mini
trucks, and assess the reasonableness of the changes. Obtain reasons for the
changes from management and, if necessary, consult an expert with regard to
the residual value or useful life;
➢ When physically inspecting the mini trucks inspect for, and enquire about, any
damaged or “not in use” mini trucks and establish whether such items should be
written down;
➢ Extract a sample of mini trucks, which were acquired a few years ago, and
compare their physical condition to their depreciated value and test for
reasonableness;
➢ By inspection and analysis of any profits or losses on disposals of mini trucks
sold recently, consider whether the straight – line method depreciation method
over five years and the related residual values are still reasonable;
➢ Reperform the depreciation calculations for the year to ensure accuracy and
compliance with the straight - line method over five years policy, and that
amounts have been correctly posted to the depreciation account and the
accumulated depreciation: mini trucks;
➢ Discuss the reasonableness of the depreciation allowance with management and
enquire into the approval procedures adopted, for example does the financial
director review the allowance.
➢ Perform analytical procedures on the depreciation allowance of mini trucks, for
example comparing to prior years and in relation to the additions and disposals of
mini trucks for the year; and
➢ Discuss with senior personnel, for example, transport and logistics manager,
whether there has been anything which may affect useful life, for example, mini
trucks running on double shift for the first time, trucks travelling over longer
mileages.
FOR ACCADEMIC NEEDS CONTACT 065 160 9781/
1. Substantive audit procedures to obtain audit evidence in respect of the
occurrence assertion for additions and disposal of mini trucks
Additions
➢ Select a sample of additions of mini trucks from the fixed asset register and trace
them to capital budget, minutes of directors’ meetings and purchase requisitions
for evidence of authority for the acquisition of the mini trucks;
➢ Inspect mini trucks acquired during the year and cross-reference description,
serial number, etc., to purchase invoices, receipts obtained from suppliers or
purchase contracts;
➢ Inspect the asset register and purchase documentation and verify that the
registration numbers of additions are not the same as the ones for mini trucks
which were already available prior to current year;
➢ Inspect the purchase invoice or purchase contract to confirm that it they are
made out to Living Well (Pty) Ltd and is for the selected mini trucks and is
signed; and
➢ Inspect payment records to confirm that payment was made for the mini trucks.
Disposals
➢ Inspect the disposal documentation, such as directors` meeting minutes used to
approve the disposal for an authorising signature;
➢ Trace the disposal by reference to the capital budget, confirm authorisation for
the disposal of the mini trucks;
➢ Trace the proceeds of the sale to the receipts` records or bank stamped deposit
slip or bank statement;
➢ Inspect the receipts and contracts of sell and confirm that they were generated
by Living Well (Pty) Ltd;
➢ Inspect the asset register and verify if the disposed assets were disposed in the
asset register and inspect a sample of mini trucks and verify that they were not
recorded as disposed.
FOR ACCADEMIC NEEDS CONTACT 065 160 9781/
, Substantive audit procedures to obtain audit evidence for the accuracy,
valuation and allocation relating to depreciation of mini trucks
➢ Confirm by enquiry of the directors that the accounting policy for depreciation
relating to mini trucks is consistent with prior year using the straight - line method
over an estimated useful life of five years;
➢ Where there is a significant such as major service to be done periodically on the
mini trucks, confirm that the allocation total of cost to the components is fair and
reasonable by enquiring with management or supplier and scrutiny of purchase
invoices and purchase contracts;
➢ Obtain a representation letter from management, confirming that they have
reassessed the useful life and residual values at year end in view of the
increased frequency of trips for the mini trucks;
➢ Review the changes (if any) to the useful life and residual values of the mini
trucks, and assess the reasonableness of the changes. Obtain reasons for the
changes from management and, if necessary, consult an expert with regard to
the residual value or useful life;
➢ When physically inspecting the mini trucks inspect for, and enquire about, any
damaged or “not in use” mini trucks and establish whether such items should be
written down;
➢ Extract a sample of mini trucks, which were acquired a few years ago, and
compare their physical condition to their depreciated value and test for
reasonableness;
➢ By inspection and analysis of any profits or losses on disposals of mini trucks
sold recently, consider whether the straight – line method depreciation method
over five years and the related residual values are still reasonable;
➢ Reperform the depreciation calculations for the year to ensure accuracy and
compliance with the straight - line method over five years policy, and that
amounts have been correctly posted to the depreciation account and the
accumulated depreciation: mini trucks;
➢ Discuss the reasonableness of the depreciation allowance with management and
enquire into the approval procedures adopted, for example does the financial
director review the allowance.
➢ Perform analytical procedures on the depreciation allowance of mini trucks, for
example comparing to prior years and in relation to the additions and disposals of
mini trucks for the year; and
➢ Discuss with senior personnel, for example, transport and logistics manager,
whether there has been anything which may affect useful life, for example, mini
trucks running on double shift for the first time, trucks travelling over longer
mileages.
FOR ACCADEMIC NEEDS CONTACT 065 160 9781/
