Audit Procedures for Property, Plant, and Equipment

AUDITING
2019

Blackmores
Answer - e
The property, Plant, and Equipment (AASB 116)
Audit Procedures
1) Verification of ownership through various documents like purchase bill, deeds,
agreements, etc. of each and every individual asset.
2) Check the value in Financial Statements is correct and not under or overvalued
3) As many additions are in both last and current year so verification of correct amount
recognized in the Books and the division of amount in capital and revenue nature. Only
capital expense should be added in asset and others should be taken to comprehensive income
(Blackmores, 2018).
4) Borrowing cost calculation for capitalization and foreign exchange profit and loss
adjustments such as foreign exchange movements are separately shown in books of which
analysis is required to be done.
5) Verifying whether the proper classification of asset is done as in the long term and short
term. Classification in the case of composite purchase between relevant components needs to
be separately recorded (Blackmores, 2018).
6) Depreciation valuation and reasonableness of choosing years for depreciation and result
of review every year.
7) Physical verification should be done to check all the assets shown actually exits and
financial statements do not include any obsolete asset or asset retired from active use has
been treated accordingly
8) Check if any reason for impairment exits or not due to any internal or external factors. In
such a case impairment valuation done by management correctly or not needs to be verified.
9) Any transaction relating to purchase or disposal of Property, Plant and Equipment with
any related party should be at arm’s length price.
10) Ensuring that none of the assets is used by any other person or entity except the
Company. The asset should be put to use for corporate affairs and not of any personal
purpose of anyone.
11) Proper risk assessment and security of asset is done. The proper value of insurance and
other preventive methods for protection of assets should be there.
12) Any asset leased out, taken on lease, charged against any liability should be properly
documented and must be regular to avoid capturing of an asset by any third party.
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