Using your firm's sampling technique, you have selected representative sample of Property, Plant and Equipment (PPE)...

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Using your firm's sampling technique, you have selected representative sample of Property, Plant and Equipment (PPE) items from the asset register. You have decided to use this sample to test whether the depreciation rate assigned to PPE is appropriate and in line with the present condition and expected use over the remaining life of each sample item. The relevant details of the sample selection and results of your test are summarised below: Profit before tax PPE account balance Sample size Dollar value of sample taken Error in the sample (depreciation rates for some Items were too low and/or remaining useful Life to equipment was overstated) $1,875,000 $11,345,000 35 $1,145,000 $48,500 Required: (a) What conclusion would you draw about 'valuation and allocation of PPE from the above information? Justify your conclusion. (3 marks) (b) Assuming that management refuses to amend the error, discuss the impact of the above information on your audit opinion. (2 marks) Using your firm's sampling technique, you have selected representative sample of Property, Plant and Equipment (PPE) items from the asset register. You have decided to use this sample to test whether the depreciation rate assigned to PPE is appropriate and in line with the present condition and expected use over the remaining life of each sample item. The relevant details of the sample selection and results of your test are summarised below: Profit before tax PPE account balance Sample size Dollar value of sample taken Error in the sample (depreciation rates for some Items were too low and/or remaining useful Life to equipment was overstated) $1,875,000 $11,345,000 35 $1,145,000 $48,500 Required: (a) What conclusion would you draw about 'valuation and allocation of PPE from the above information? Justify your conclusion. (3 marks) (b) Assuming that management refuses to amend the error, discuss the impact of the above information on your audit opinion. (2 marks)

Answer rating: 100% (QA)

a Based on the information provided the conclusion that can be drawn about the valuation and allocation of PPE is that there are errors in the depreci... View the full answer