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Dear tutors,
I have this audit reponse need to ask u
” audit risk:
valuation of inv. Is equal selling price minus average of profit marginAudit response:
Testing should be undertaken to confirm cost and NRV of inv. On a LINE-BY-LINE basis”What does “LINE-BY-LINE” meaning? Can u explain for me and thank u in advance
Each item of inventory has to have cost and never looked at separately, not just the total cost and never of all inventory.
Can u suggest me an audit response for this risk:
“Audit risk:
Production facility has a large amt of unused plant and equipment. As per IAS16 & IAS 36 these plant and equipment are stated at lower if CV and RA due to impairment”Well, you need to collect evidence about carrying values and recoverable amounts.
Carrying values are easy (cost less depreciation).
Recoverable amounts will need management to produce some calculations that you have to review. RAs are quite difficult as it depends on future cash flows and many assumptions are needed to estimate those.
Look to see how the machines are being used currently – if at all. What are they producing? Are those products still popular?
Often in cases of old machinery recoverable amounts are likely to be very low scrap values.
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