Audit Procedures for Property, Plant, and Equipment

This document discusses the audit procedures for property, plant, and equipment (AASB 116) including verification of ownership, valuation, classification, depreciation, impairment, and more. It also covers the audit procedures for liabilities including verification of tax liability, payment to creditors, deferment of interest, valuation of trade creditors, and more.

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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13) The proper repair and maintenance should be carried out regularly to avoid depletion
and wastage of resources (Blackmores, 2018).
Audit procedure for liability
1) The verification of calculation of tax liability needs to be done taking into
consideration all applicable provision of income tax.
2) The overall payment made to creditors should be ascertained and ensure that it is
recorded in the books. The evaluation between the two should be done.
3) The main reason for the defer in the payment of the interest and outstanding expenses
must be considered to avoid penalty and will ensure that going concern assumption of
Blackmores is not endangered (Blackmores, 2018).
4) The verification and valuation of the trade creditors needs to be ascertained.
5) The correctness of liabilities should match the genuine level of purchase where the
gross profit should be compared with the last year ratio to check the correctness of the sales
level (Blackmores, 2018).
6) The bills that are paid after the balance sheet date should be with the entries of the
cashbook
7) A verification should be done whether the interest due is paid or not. If the interest
falls due and not paid till the due date then it must be seen whether the same has been
reflected in the liability section (Blackmores, 2018).
The accounting standard affecting this are:
AASB 116: Property, plant, and equipment
AASB 117: Leases
AASB 123: Borrowing Cost
AASB 136: Impairment of Assets
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References
Blackmores. (2018) Blackmores 2018 annual report and accounts. Available from:
https://www.blackmores.com.au/-/media/files/investor-centre/annual-and-half-yearly-reports/
blackmores-annual-report-2018_web-final.pdf?
la=en&hash=D0C9F6CC732CA4F557FE8E92A24AF04B64FEABEF [Accessed 11 May 2019]
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