How do auditors test depreciation?
Table of Contents
How do auditors test depreciation?
Audit procedures that auditors normally perform in an audit of depreciation expenses include recalculation of depreciation expenses, analytical review, an inspection of fixed assets addition, an inspection of fixed assets disposal, review the depreciation method, and useful life of assets.
How do you test for audit going concern?
Further procedures that the auditor may perform to conclude whether a material going concern uncertainty exists include:
- Analysing and discussing the entity’s latest available interim financial statements.
- Reading the terms of debentures and loan agreements and determining whether any have been breached.
How do you test going concern assumption?
In assessing whether the going concern assumption is appropriate, management assesses all available information about the future, considering the possible outcomes of events and changes in conditions and the realistically possible responses that are available to such events and conditions.
What are the key indicators of going concern?
Conditions that lead to substantial doubt about a going concern include negative trends in operating results, continuous losses from one period to the next, loan defaults, lawsuits against a company, and denial of credit by suppliers.
How do you audit depreciation and fixed assets?
Audit of fixed assets
- Step 1: understand the client procedure of Fixed Assets acquisition and disposal.
- Step 2: Obtain Fixed Assets Register as maintained by the Client.
- Step 3: Vouching of Additions to Fixed Assets.
- Step 4: Vouching of Deletion from Fixed Assets.
- Step 5: Depreciation and Amortization.
- Step 6: Revaluation.
What is PSA 570?
PSA 570 (REVISED), GOING CONCERN. management to evaluate the potential significance of the event or condition on its assessment of the entity’s ability to continue as a going concern.
How do you know if a problem is going concern?
How to Evaluate Going Concern
- Key industry financial metrics.
- Operating results.
- Future obligation and liquidity.
- Covenant compliance.
- Forecasted net cash flows from operations.
- Capital expenditure commitments.
What are the auditor’s responsibilities for going concern?
The auditor has a responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time, not to exceed one year beyond the date of the financial statements being audited (hereinafter referred to as a reasonable period of time).
How should an auditor verify fixed assets?
Verification of fixed assets consists of examination of related records and physical verification. The auditor should normally verify the records with reference to the documentary evidence and by evaluation of internal controls. Physical verification of fixed assets is primarily the responsibility of the management.
Why do auditors test fixed asset?
The test of fixed assets disposal will ensure the rights and obligations, completeness, occurrence, and accuracy audit assertion.
How many steps are in the going concern assessment?
The going concern assessment is a two-step process and described below. Step 1 requires management to evaluate whether events and conditions raise substantial doubt about the entity’s ability to continue as a going concern.
What is ISA 570 going concern?
The revised ISA deals with the auditor’s responsibilities in an audit of financial statements relating to going concern and the implications for the auditor’s report.
Who is responsible for making the going concern assessment?
409 and 410) also include a presumption that a company will continue carrying on a business as a going concern. The assessment required to be performed by directors should consider all the facts and circumstances of an individual company known at the date of approval of the accounts.
