This is the first-year audit of a company that wants to register with the SEC in the


This is the first-year audit of a company that wants to register with the SEC in the near future. The company has been very successful and uses a fixed-assets database to manage its fixed assets. The auditor had received review reports (but not audits), performed by other auditors in previous years, and the auditor did not note unusual fluctuations in either the depreciation or equipment accounts in previous years. The client implemented the database program only two years ago and has recently taken a physical inventory of property and has used the physical inventory to adjust the database. Through planning, the auditor was able to observe the taking of the equipment inventory and was satisfied that was done properly.
The database contains the following information for each asset:
• Property identification number
• Property description
• Date acquired
• Cost
• Class of assets
• Depreciation method
Salvage value (if applicable)
• Current-year depreciation-book
• Accumulated depreciation-book
• Current-year depreciation-tax
• Accumulated depreciation-tax
• Any adjustments such as write-downs or renovations
• Expected life of asset
• Location of property
• Department or person requesting purchase of item

a. Write an audit program to audit the equipment account for the year. Indicate where and how you would use generalized audit software in your audit. (Ignore tax considerations at this point.)
b. Describe how generalized audit software might be used in the audit of property for this client.
c. What audit procedures would have been mandated had the client not taken a physical inventory of property?

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Auditing a business risk appraoch

ISBN: 978-0324375589

6th Edition

Authors: larry e. rittenberg, bradley j. schwieger, karla m. johnston

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