Вы находитесь на странице: 1из 4

Audit of Plant, Property and Equipment

Audit Procedures

Obtain from client a schedule plant, property and equipment.


Select some items for physical counting.
For acquisitions during the accounting period, examine supporting papers for
invoice price and related costs.
Examine insurance coverage.
Analyze repairs and maintenance account.
For disposal during the accounting period, examine supporting papers for
proceeds and propriety of journal entries.
Determine the clients policy on depreciation and the consistency of its
application.
Review propriety of presentation of plant, property and equipments
depreciation expense and accumulated depreciation in the financial
statement and the adequacy of disclosure.

Internal Control

Maintenance of plant ledgers.


Authorization for capital expenditures.
Authorization for disposals and retirements.
Policy on expenditure to be capitalized.
Physical count of plant, property and equipment.
Satisfactory system for safeguarding small tools.

Frauds on plant, property and equipment

1. Properties that are needed are acquired.


2. Asset imbalance within the firm, some departments having very few assets
while others having more than what is necessary.
3. Cost overruns and overpayments to contractors.
4. Assets are acquired which should have been leased.
5. Assets are stolen, lost, damaged or destroyed.
6. Property records are altered, lost, or destroyed to conceal theft of asset.
7. Assets cannot be located and unneeded duplicates are acquired.
8. Assets needed in another segment are sold.
9. Retired assets are sold without proper authorization, proceeds from the sale
are pocketed and sale not recorded.
10.Properties are used for personal purposes without authority.
11.Plant, property and equipment acquisitions are made with businesses which
are giving certain considerations known as kickbacks, thereby overstating the
asset cost.
12.Small tools are stolen. The theft being concealed by charging expense.

Audit of Owners Equity

Audit Procedures

Sole proprietorship and partnership.


Obtain from client copies of articles of incorporation, by laws, corporate
minutes.
Obtains or prepares schedules of the various accounts comprising owners
equity.
Checks schedule for arithmetical accuracy and trace totals to general ledger
control accounts.
Request confirmation of capital stock details from transfer agent.
If client keeps its own capital stock records, verify issued, unissued, and
retired certificates and vouch transactions during the period that change
owners equity.
Analyze retained earnings and appropriation accounts.
Verify dividend declarations and payments.
Examine recorded appreciations of plant, property and equipment.
Determine propriety of presentation in the financial statement.

Internal Control

If the client does not employ and independent transfer agent, the unissued
certificates and stabs should under the custody of an officer, surrendered
certificates should be effectively canceled stamps should be properly
attached for original issues and transfers.
If client does not employ an independent dividend paying agent, proper
control should be exercised in preparing, mailing and accounting for dividend
checks.

Frauds on Owners Equity

1. Distribution of partnership profits is made to favor one partner in violation of


partnership agreement.
2. Profits are arbitrarily overstated to increase bonus payments when
computations are based on profits.
3. Unissued stock certificates are stolen and issued by forging signatures of
authorized officials.
4. Dividends are paid to fictitious, non-existent stockholders.
5. Unclaimed dividend checks are appropriated.
6. Unissued stocks are stolen.
7. Treasury stocks are purchased from favored stockholders in a financially
strapped corporation.
8. Dividends are paid without adequate retained earnings.
9. Personal expenses of owners are charged to companys expenses.

Audit of Intangible Assets

Audit Procedures

Obtain from the client a schedule of intangible assets.


Analyze intangible asset accounts and related amortizations.
Determine utility of intangibles.
Determine the propriety and consistency of amortizations.
Obtain confirmation of licensing agreement from parties with whom client
entered into agreement.
Determine propriety of presentation in the financial statements and adequacy
of disclosure.

Internal Control

Acquisitions, write-offs, and disposals of intangibles should be properly


authorized.
Intangibles should be properly recorded in the books.
Amortization policies should be proper and adequate.

Frauds on Intangible Assets

1. Useless intangibles are acquired.


2. Useful intangibles are sold or written off.
3. Valuation of intangibles over or understated thus resulting to misstatement of
financial statements.

Audit of Investments

Audit Procedures

Obtain a schedule or schedules of investments from the client.


Inspect securities in the presence of custodian.
Analyze investments and related income accounts.
Determine proper cut-off.
Determine whether investments and related income accounts are presented
in accordance with generally accepted accounting principles on a basis
consistent with the preceding year.
Determine whether investments are properly classified on the balance sheet
date with adequate disclosure of material facts.

Internal Control

Securities should be physically safeguarded.


Securities should be counted periodically.
Securities should be in the name of the client.
Purchases and sales of securities should be authorized.
Written off securities should be controlled.

Frauds on Investments

1. Without authorizations, investments are utilized as collaterals for personal


loans.
2. Marketable securities are sold without authority. The sale is covered by
substituting similar securities of another company or by purchase of
securities of the same company but at a later date.
3. Written off securities are subsequently sold and the proceeds abstracted.
4. Securities are acquired from certain sources in consideration of kickbacks.
5. Dividends and interest income are not receipted, not recorded and
misappropriated.
6. Investment and related income misstated.