Your firm is auditing the financial statements of Newthorpe Manufacturing Limited for the year ended 30 June 20X0. You have been assigned to the audit of the company’s fixed assets, which comprise freehold land and buildings, plant and machinery, fixtures and fittings and motor vehicles.

The freehold land and buildings were purchased 10 years earlier (in July 19X0) for £2 million. At the date of purchase, a valuer estimated that both the land and the buildings each had a value of £1 million. Since 19X0, depreciation has been charged on the buildings at two per cent per annum on-cost. At 30 June 20X0 the accumulated depreciation is

£200,000 before the revaluation.

A qualified valuer, who is not an employee of the company, has recently valued the land and buildings at £5 million (£2.9 million for the land and £2.1 million for the buildings).

These values will be incorporated into the financial statements as at 30 June 20X0.

The partner in charge of the audit is concerned at the large increase in the value of the land and buildings since they were purchased in 19X0. She has asked you to check the reliability and accuracy of the valuation. She suggested that SAS 520 (ISA 620), Using the Work of an Expert could assist you in carrying out this work.

In addition, you have been asked to verify the existence and completeness of plant and machinery that is recorded in the company’s computerised fixed asset register. The fixed asset register records the description of each fixed asset, the original cost, the depreciation charge and the accumulated depreciation.

Required

(a) Describe the audit work you will carry out to check whether the valuer has provided an accurate and independent valuation of the land and buildings.

(b) Describe the audit work you will carry out to check the existence and completeness of plant and machinery, as recorded in the company’s fixed asset register.