BAC 401 AUDIT PRACTICE AND INVESTIGATION-verification of assets

BAC 401 AUDIT PRACTICE AND INVESTIGATION-verification of assets

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This question pertains auditing of construction contract which is in relation to IAS 11 which defines construction contract as specifically negotiated for the construction of an asset or combination of assets that are closely interrelated in terms of design, technology and function or their ultimate purpose .such contracts last for more than one accounting period. In this given case the question requires the review of net assets in which we will need verification. Verification is the proving of the authenticity of the recorded amounts of assets and liabilities, in this regard we adopt ISA 500 which deals with audit evidence. It states that the auditor should use assertions for classes of transaction, accounts balances and presentation and disclosures in sufficient details to form the basis for the assessment of risk of material misstatement, design and performance of auditing procedures. We narrowed down to the assertions about account balances, they include existence, completeness, valuation, occurrence, measurement and presentation and disclosure. Existence Not only should an asset and liability have a cost and value, there has to be evidence that they actually existed. In case of tangible assets existence should existence is verified by observation and inspection .i.e. we can check whether the construction machines, land and buildings motor
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