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Hi Tutor, could you please explain this point to me, please?
”In the case of additions and disposals to the assets made during the year the auditor should inspect ledger accounts to ensure that the additions and disposals are not recorded as purchases and sales revenue.”
Why wouldn’t addition be recorded as Purchases?
Thanks.
I don’t understand this at all – it’s too vague.
For the “purchase” side the auditor would look at:
– recorded additions (in asset register/asset account in G/L) and agree to asset/invoice to confirm it is a “capital” items – a test for overstatement PPE
– repair/maintenance a/cs for larger expense items (that could be capital) and agree to invoice to confirm expenses – a test for understatement of PPEBut this is basic AA substantive procedures rather than something I would expect for AAA.
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