In the audit of Greenline Manufacturing Company Ltd for the year ended 30 June 20X1, Ann Bartlett,
Question:
In the audit of Greenline Manufacturing Company Ltd for the year ended 30 June 20X1, Ann Bartlett, public accountant, concluded that the lack of an audit trail for the property, plant and equipment accounts precluded auditing that area in the traditional manner. As a result, the decision was made to use generalised audit software in the verification of certain aspects of the accounts. The GAS application includes the following specific objectives:
1. Foot the file and print totals by major property category for cost of all assets, cost of current additions, and accumulated and current depreciation for both book and tax purposes.
2. Prepare a listing of all additions over $5000 for vouching and inspection.
3. Prepare a listing of all disposals for detailed verification.
4. Verify the calculations of depreciation expenses for both book and tax purposes. The permanent asset master file for 30 June 20X0 was saved by the client and includes the same information as the 30 June 20X1 file. Their contents are as follows:
Element no. Description of contents
1.........................................................Asset number
2............................................................Description
3.............................................................Type code
4.......................................................Location code
5..................................................Year of acquisition
6.......................................................................Cost
7...................Accumulated depreciation-beginning book
8.........................................Depreciation-YTD book
9............................................................Useful life
10........................................Tax depreciation method
11...................Accumulated depreciation-beginning tax
12..........................................Depreciation-YTD tax
REQUIRED
a. Explain in detail how the information on the 30 June 20X0 and 30 June 20X1 master files should be used to fulfil the four audit objectives.
b. List the reports that will be generated by GAS.
c. Explain what additional verification is necessary on each of these reports to satisfy the auditor that property, plant and equipment is fairly stated.
Step by Step Answer:
Auditing Assurance Services and Ethics in Australia an Integrated Approach
ISBN: 978-1442539365
9th edition
Authors: Alvin A Arens, Peter J. Best, Greg Shailer, Brenton Fiedler