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THE INSTITUTE OF FINANCE MANAGEMENT

FACULT OF ACCOUNTING, BANKING AND FINANCE
BACHELOR OF ACCOUNTANCY
GROUP ASSIGNMENT
AUDITING (AC 732)
NAMES; REGISTRATION NO; HEZEKIA DAVIS BAC/11/57562 HASHIMU MADEMBWE BAC/11/58085

QUESTION
Describe the Audit Procedure of the following;-
(1) Non Current Assets
(2) Current Assets
* Stock
* Petty Cash
* Payroll
* Accounts Payables

AUDITING PROCEDURE FOR NON CURRENT ASSET
Audit objectives
* The auditor will be aiming at proving the following assertions; * Proper authorization to acquire the asset
* Valuation
* Existence
* Ownership rights
* Presentation and disclosure
Cost
The significant plant and machinery acquired during the year is vouched to supporting documentation such as supplier’s invoices, cashbooks, approved budgets etc. Authorization
Check in the directors’ minutes or AGM minutes for proper authorization for acquisition of the asset. Valuation
Auditor’s responsibility is to ensure that the accounting policy for depreciation is appropriate. For example if the diminution in value of an asset is largely related to time then reducing balance method would not be appropriate but straight-line method. Check appropriateness of the useful life. Where the assets have been revalued the auditor should ascertain that an independent and qualified value carried out this revaluation. Existence

Existence should be checked by physical inspection. The problem arises that items of plant & machinery are mobile, numerous, portable and valuable. It becomes difficult therefore for the auditor to be assured that the value attached to the plant and machinery represents plant and machinery that actually exist at balance sheet date. To ensure the existence of plant and machinery, it is necessary to have a Fixed Asset Register. Fixed Asset Register

For it to be independent the person maintaining it must have no responsibility for: the assets purchase, maintenance, custody or disposal. * Ordering or authorizing the purchases of fixed assets.

* The custody of the fixed assets.
* Authorizing the disposal of fixed assets.
* Maintaining general ledger accounts.
* Custody of readily realizable assets.
The register contains the following information:
i. Fixed asset number.
ii. Fixed asset location & responsibility for custody.
iii. Nature and description of the asset.
iv. The cost and date of purchase.
v. The estimated useful life and the residual value.
vi. Accounting policy for depreciation.
vii. Accumulated depreciation.
viii. The gain or loss on disposal.
ix. Capital allowances.
When the register is reconciled to the general ledger the auditor can check the asset for physical existence by reference to the number and locations recorded. Beneficial Ownership
For Plant & Machinery, it is usually implied and unless there is clear evidence to the contrary, proof of purchase and possession will suffice as evidence of ownership.

Presentation and disclosure
For proper presentation fixed assets should be split into appropriate classes. The following information should be disclosed; * Depreciation policy
* Useful life’s
* Total depreciation charge for the period
* Additions of new assets or disposals during the period
* Any assets that are charged in favor of another person.

AUDIT PROCEDURE FOR STOCK
If your company records its inventory as an asset, and it undergoes an annual audit, then the auditors will be conducting an audit of your inventory. Given the massive size of some inventories, they may engage in quite a large number of inventory audit procedures before they are comfortable that the valuation you have stated for the inventory asset is reasonable. Here are some of the...
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