Trắc nghiệm ôn thi giữa kì Nguyên Lý Marketing 1

CHAPTER 9
AUDIT TANGIBLE FIXED ASSETS AND DEPRECIATION 7/29/2020 1
201106 – Audit tangible fixed Assets and Depreciation LEARNING OBJECTIVES
• Understand the contents and features of tangible fixed Assets and Depreciation
• Analyze the economic transactions and recognize the
audit risks of material misstatements related to these
components in the financial statements
• Understand the audit process and perform the audit tests for these components. 7/29/2020 2
201106 – Audit tangible fixed Assets and Depreciation CONTENTS OF CHAPTER 3 1 Contents and Features 2 Assertions 3 Internal Control 4 Audit Procedure 7/29/2020 3
201106 – Audit tangible fixed Assets and Depreciation Part 1 CONTENTS AND FEATURES 7/29/2020 4
201106 – Audit tangible fixed Assets and Depreciation CONTENTS
• A tangible fixed asset is a long-term tangible piece of
property that a firm owns and uses in the production of its income
• A tangible fixed asset is not expected to be consumed
or converted into cash any sooner than at least one year's time.
• The tangible fixed asset value must be equal or greater
than 30 million VND according to current policies and regulations in Vietnam. • Account code: 211 7/29/2020 5
201106 – Audit tangible fixed Assets and Depreciation CONTENTS Tangible fixed asset includes:
• Buildings and structures – Account code: 2111
• Machinery and equipment – Account code: 2112
• Means of transportation and transmitters – Account code: 2113
• Office equipment and furniture – Account code: 2114
• Perennial plants, working and producing animals – Account code: 2115
• Other fixed assets – Account code: 2118 7/29/2020 6
201106 – Audit tangible fixed Assets and Depreciation CONTENTS
• Depreciation is an accounting method of allocating the
cost of a tangible fixed asset over its useful life. • Accumulated depreciation is the cumulative
depreciation of an asset up to a single point in its life.
• An asset's carrying value on the balance sheet is the
difference between its purchase price and accumulated depreciation.
• Accumulated depreciation – Account code: 2141 is a contra-asset account. 7/29/2020 7
201106 – Audit tangible fixed Assets and Depreciation FEATURES
• Value of tangible fixed assets normally has a great
amount and a significant proportion of assets value.
• Tangible fixed assets are quite sensitive to frauds.
• There are a few large transactions related to tangible
fixed assets in an accounting period.
• Cut-off is not an issue because there is no continuous
flow of transactions relating to tangible fixed assets.
• Depreciation Expenses are also often manipulated by methods of depreciation. 7/29/2020 8
201106 – Audit tangible fixed Assets and Depreciation Part 2 ASSERTIONS 7/29/2020 9
201106 – Audit tangible fixed Assets and Depreciation
Assertions about account balances  Existence  Rights and Obligations  Completeness  Valuation and Allocation 7/29/2020 10
201106 – Audit tangible fixed Assets and Depreciation Part 3 INTERNAL CONTROL 7/29/2020 11
201106 – Audit tangible fixed Assets and Depreciation INTERNAL CONTROL
Purposes of internal controls for tangible fixed assets:
• Improve the efficiency of capital investments in tangible fixed assets
• Make sure that tangible fixed assets are used with right purposes.
• Record correctly costs of tangible fixed assets,
depreciation, repair and maintenance expenditures. 7/29/2020 12
201106 – Audit tangible fixed Assets and Depreciation INTERNAL CONTROL
Some controls of tangible fixed assets:
• Procedures for procurement of tangible fixed assets and construction in process
• Procedures for liquidation or disposal of tangible fixed assets • Accounting policies on distinguishing between
expenditures included in historical cost and accounted as expenses in a fiscal year
• Periodic physical counting policies • Depreciation rules… 7/29/2020 13
201106 – Audit tangible fixed Assets and Depreciation Part 4 AUDIT PROCEDURE 7/29/2020 14
201106 – Audit tangible fixed Assets and Depreciation AUDIT PROCEDURE
- Valuation of internal control - Substantive tests 7/29/2020 15
201106 – Audit tangible fixed Assets and Depreciation VALUATION OF INTERNAL CONTROL
1) Figure out about internal control
2) Valuate preliminarily control risk
3) Design and perform tests of control. Assess whether
the internal control procedures have existed and operated effectively or not?
4) Revaluate control risk and design substantive tests 7/29/2020 16
201106 – Audit tangible fixed Assets and Depreciation VALUATION OF INTERNAL CONTROL
1/ Figure out about internal control:
- Create narrative tables and use flowcharts to describe internal control procedures
- Establish the narrative tables and flowcharts through
interviews, observations and questionnaires 7/29/2020 17
201106 – Audit tangible fixed Assets and Depreciation VALUATION OF I NTERNAL CONTROL
2/ Valuate preliminarily control risk:
Based on understanding of internal control procedures,
auditors carry out a preliminary assessment of control risk
for every assertion lower than the maximum
- If the level of assessed control risk is low or the internal
control procedures are effective and efficient, auditors
should perform the tests of control
- If the level of assessed control risk is high and is not
able to be reduced, auditors will not perform tests of
controls should perform the substantive tests at an appropriate level. 7/29/2020 18
201106 – Audit tangible fixed Assets and Depreciation VALUATION OF INTERNAL CONTROL
3/ Design and perform tests of control:
The auditors design and perform tests of control to
gather evidences for the existence and effectiveness
of internal control procedures.
Key references [1] – Chapter 12:
• Page 571: Obtain evidence about internal control
operating effectiveness for long-lived asset accounts and related expenses 7/29/2020 19
201106 – Audit tangible fixed Assets and Depreciation VALUATION OF INTERNAL CONTROL
4/ Revaluate control risk and design substantive tests:
Based on the results of tests of control, auditors will
revaluate control risk for each assertion to adjust the
level of performing substantive tests
• Ineffective internal control => increase the level of performing substantive tests
• Effective internal control => maybe decrease the level
of performing substantive tests 7/29/2020 20
201106 – Audit tangible fixed Assets and Depreciation