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Dear Sir
To verify existence of Non-Current assets(NCA), the auditor needs to physically inspect them. But what happens if the entity’s major NCAs are always moving.
Following examples:
Taxi business where the taxi cars are moving from one destination to another.
Courier company where the vans are always on the move to deliver goods ordered online by the customers.
Haulage company: Lorries collecting goods and delivering them.
Bus company: Buses are moving to carry passengers from one bus stop to another.
Train company: Trains are moving to carry passengers from one station to another.How do we verify the existence of the entity’s NCAs that are always moving?
A good question – and I remember well chasing after articulated lorries up and down motorways as an audit trainee!
So one possibility is that not only during the final audit, but throughout the year, members of the audit team make a note of any registration numbers that they happen to see.
But what you have to remember is that the client must have controls in place to ensure that assets are safeguarded and therefore exist. The auditor would then need to test those controls. So, for example, internal audit may carry out checks on the existence of assets recorded in the non-current assets on days when the assets are not moving (or moving less than usual) – e.g. on holidays.
Bear in mind that although physical inspection by the auditor is the best evidence of existence (though not of ownership), there will be other evidence of existence – e.g. workshop records of repairs or MoT certification.
Also, that there would be no revenue if these assets did not exist. Transport companies will have timetables or other schedules that they operate to. There will be records to show which vehicles operate on which route, records of cancellations, etc.
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