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Auditing審計學 基于環境變化的概念Ritterch13.ppt

'Auditing審計學 基于環境變化的概念Ritterch13.ppt'
Chapter 13Audit of Fixed Assets and Related Expense AccountsDiscuss Business Risk and Business EnvironmentFixed assets are often the large category of assetsBecause there is typically limited activity in fixed assetsAuditors usually focus on testing transactions rather than tests of account balancesAudit period transactions include additions, disposals, write-offs, and depreciationWhat is earnings management?Ways fixed assets can be used to manage earnings:Change estimated useful lives and residual valuesCapitalize costs that should be expensed, such as repairs and maintenanceAccount for capital leases as operating leasesReview Risks Associated with Fixed Assets and Related Expenses:Unrecorded asset disposalsEnvironmental issuesObsolescence or impairment of assetsRestructuring charges related to changes in the nature of the businessIncorrect recording of assets, hidden by complex ownership structures designed to keep assets (and related liabilities) off the booksIncorrect valuation of assets acquired as part of a group purchaseAmortization or depreciation which does not reflect the economic use of the assetFailure to recognize impairments in valueIncorrect computation of gains/losses on asset disposalImproper recording of capital leases as operating leasesCapitalization of costs that should be expensedReview Risks Associated with Fixed Assets and Related Expenses:How does the auditor become aware of the risks?Auditor will normally be aware of these risks through review of:Industry trends, technological advances, and changes in location of production facilitiesBusiness plan for major acquisitionsMajor contracts regarding capital investments or joint venturesMinutes of board of director meetingsCompany filings with the SEC describing actions, risks, strategiesDiscuss Analytical Analysis for Possible MisstatementsAnalyze industry trends and changes in product linesHelps identify assets that are not as useful as in previous yearsTour the plant and note idle equipmentAnalyze Depreciation for Consistency and Economic ActivityReview gains/losses on equipment disposals Perform analytical estimate of depreciationExplain Evaluating Control Risk and Control EffectivenessControls issues:Periodic inventories of physical assets reconciled to the equipment subsidiary ledgerEnsure all purchases are authorized and properly valuedClassify new equipment according to expected use and useful lifePeriodic review of estimatesIdentify obsolete or scrapped equipment and write down to scrap valueSafeguard assetsPrevent unauthorized journal entriesPeriodic review of management strategy to determine continued usefulness of equipmentThe auditor should assess both the existence and effectiveness of client controls in determining which direct tests need to be performedReview Tests of Property Additions and DisposalsIf the beginning balance is established, testing can be limited to additions and disposals during the yearAdditions:Auditor can 。省略部分。dits?During first-time audit of a new client, the auditor will need to verify the beginning balancesIf the client has been audited before, the predecessor auditor should be contacted If the predecessor documentation cannot be used, or if this is the client's first audit,Auditor will sample property in the beginning balance andVouch back to supporting documents to verify costTrace back to physical assets to verify existenceAuditor should also recalculate depreciation expense and accumulated depreciationDiscuss Depreciation Expense and Accumulated DeprecationThe procedures used to test deprecation will depend on the controls over depreciation and the risk associated with the engagement and account balanceLow risk - analytical procedures:Current estimate of depreciation is calculated and modified for additions and disposals during the yearRatios are computed to determine reasonableness of current deprecationHigh risk - tests of details:Foot the property ledger and agree to the general ledgerRecalculate depreciation for sample of items Comment on Intangible AssetsMay be difficult to determine which costs should be capitalizedEspecially for internally developed intangiblesAuditor will review client accounting to ensure per GAAPMay be difficult to determine appropriate amortization periodExpected economic life or legal life, whichever is shorterAuditor should review trade publications for competition and new product introductionsAuditor should make inquiries of client and legal counselAuditor should review client procedures for determining when intangibles become impairedReview Handling Natural Resources May be difficult to determine which costs should be capitalizedMost companies have procedures for identifying costsAuditor should test capitalization of new assets by examining documentsMay be difficult to estimate the amount of the natural resourceMany companies use geologists to estimate amount of natural resources Auditor may hire a specialist to review any geological analysis Depletion should be based on amount extracted during the yearDepletion is based on units of production approachAuditor may use analytics like current depletion compared to prior yearsAuditor may analyze production data and then recompute depletionMay be difficult to estimate reclamation expensesAuditor should examine the reasonableness of procedures used by management to estimate costReview Handling Natural Resources (Continued)Discuss Leases: Audit ApproachObtain copies of lease agreementsReview agreements to determine if capital or operating leasesReview client records to determine if leases properly accounted forReview lease expense accountSelect entries and review to make sure they are for operating leasesFor all capital leasesDetermine assets and obligations are recorded at net present valueDetermine the economic life of the assetCalculate amortization and interest expenseConsider bargain purchase agreements to determine economic life
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變化 環境 概念 ritterch13 基于 ritterch 審計學 13 auditing
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