14-27 To support financial statement assertions, an auditor develops specific substantive procedures to satisfy or address each assertion. Required: Items (a) through (c) represent assertions for the property and equipment accounts. Select the most appropriate audit procedure from the following list and enter the number in the appropriate place on the grid. (An audit procedure may be selected once or not at all.) Audit Procedure: 1. Trace opening balances in the summary schedules to the prior-year's audit working papers. 2. Review the provision for depreciation expense and determine that depreciable lives and methods used in the current year are consistent with those used in the prior year. 3. Determine that the responsibility for maintaining the property and equipment records is segregated from the responsibility for custody of property and equipment. 4. Examine deeds and title insurance certificates. 5. Perform cutoff tests to verify that property and equipment additions are recorded in the proper period. 6. Determine that property and equipment are adequately insured. 7. Physically examine all major property and equipment additions. Page 499 Specific Assertion a. Verify that the entity has the legal right to property and equipment acquired during the year (rights and obligations). b. Verify that recorded property and equipment represent assets that actually exist at the balance sheet date (existence). c. Verify that net property and equipment are properly valued at the balance sheet date (valuation and allocation). Audit Procedure