Requires knowledge of clients business and industry

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Requires knowledge of client’s business and industry.
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Assertions about classes of transactions Example Occurrence Vouch significant additions and disposition to vendor invoices or other supporting documentation. Completeness Trace a sample purchase requisitions to loading dock report and to the PP&E records. Authorization Vouch a sample of PP&E addition to documentation indicating proper authorization. Accuracy For asset written off, test amount charged against income and accumulated depreciation. Cut-off Examine the purchases and sales of capital assets for a few days before and afer year-end. Classification Vouch transactions included in repairs and maintenance for items that should be capitalized. 1. Substantive Tests of Transactions
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2. Tests of Account Balances Assertions about classes of transactions Example Existence Verify the existence of major additions by physically inspecting the capital asset. Rights and obligations Examine or confirm deeds or title documents for proof of ownership Completeness Physically examine a sample of capital assets and trace them to the property, plant and equipment subsidiary ledger. Valuation and allocation Evaluate fixed assets for significant write-offs or impairment and test depreciation calculation for a sample of capital assets.
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3. Substantive Analytical Procedures # Compare prior-period balances in property, plant & equipment and Depreciation expense with current-period balances, talking into account any changes In conditions or asset composition. # Compute the ratio of depreciation expense to the related property, plant & Equipment accounts, and compare to prior years’ ratio. # Compute the ratio of repairs and maintenance expense to the related Property, plant & equipment accounts, and compare to prior years’ ratio. # Compute the ratio of insurance expense to the related property, Plant & equipment accounts, and compare to prior years’ ratio. # Review capital budgets and compare the amounts spent with amounts budgeted.
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THANK YOU
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  • Fall '17
  • Depreciation, Generally Accepted Accounting Principles, DAN PERALATAN

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