- This topic has 3 replies, 3 voices, and was last updated 8 years ago by
.
- Posts
Q. Surplus plant and equipment was sold during the year, resulting in a profit on disposal of $200000
Audit risk = significant profits or losses on disposal are an indication that the depreciation policy of plant and equipment may not be appropriate . Therefore depreciation may be overstated
Could you please explain this ?Audit response = discuss with finance director regarding the depreciation policy to assess its resonableness
Does it make a difference if we discuss with the management rather than finance director ?The profit or loss on disposal = Sales proceeds – NBV
NBV depends on depreciation. If depreciatoon is too low then there will ba a loss on disposal. If too high there will be a profit on disposal.
The finance director is part of management.
- You must be logged in to reply to this topic.