- 20 Marks
AA – Nov 2022 – L2 – Q4 – Audit Evidence for Engineering Assets and Liabilities
Addressing audit evidence for engineering company assets and liabilities, including procedures for confirmations and plant disposals.
Question
You are part of an audit team engaged on the audit of an engineering company which has a substantial amount of plant and machinery in its books. While reviewing the accounts, you also observed that there were some current assets and liabilities that may require external confirmations.
Required:
a. How would you establish the amount and level of audit evidence required for the current assets and liabilities? (5 Marks)
b. State which procedures will be applied to generate audit evidence in the following scenarios:
i. Confirming the accuracy of figures in the trade receivables account
ii. Confirming that the plant and machinery purchased in the year is actually in use during the year
iii. Ascertaining that the change in performance is in line with expectations
iv. Confirming the accuracy of the total receivable figures in the statement of financial position
v. Confirming contingent liability as to legal fees (5 Marks)
c. State the audit procedures you would take concerning the disposal of plant and machinery. (5 Marks)
d. State the requirements of ISA 505 concerning maintaining control over the external confirmation requests of current assets and liabilities. (5 Marks)
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