For non-current assets and liabilities, such as property plant and equipment,

investments and long-term debt, some audit evidence may be obtained by examining
the accounting records and other information underlying the opening PSA 510
(Redrafted) 7 balances. In certain cases, the auditor may be able to obtain some audit
evidence regarding opening balances through confirmation with third parties, for
example, for long-term debt and investments. In other cases, the auditor may need to
carry out additional audit procedures.

Property, Plant and Equipment

A. Existence: Do the assets exist?

1. Inspect additions or if initial audit, inspect all assets.

a. Vouch a sample from accounting records to underlying documentation.

b. Vouch a sample from the accounting records to the physical assets.

2. Test cutoff. Examine documents relating to acquisition and disposal to

determine proper recording period.

B. Completeness. Are all PPE transactions reflected in this period's balance?

1. Perform analytical procedures.

2. Reconcile subsidiary and general ledger.

a. Prepare Schedule of PPE assets from subsidiary ledger or client

worksheets for testing. Include in work papers.

3. Analyze repairs and maintenance.

a. Evaluate debits in repairs and maintenance account to determine

proper recording (capitalize perhaps?).

b. Evaluate additions to PPE to determine proper recording (non

capitalizing items perhaps?).

C. Rights and Obligations. Does the client own the PPE?

1. Examine titles and lease agreements.

 2. Evaluate whether leases are properly recorded as operating and/or capital
leases.

3. Vouch entries in PPE with payment records to ascertain ownership.

4. Vouch entries in PPE with insurance records (payments to insurers) to

ascertain ownership.

5. Vouch entries in PPE with property tax records (assessments and

payments to governments) to ascertain ownership.

D. Valuation and Allocation. Are PPE assets recorded in accord with GAAP?

1. Vouch additions and disposals by examining documentation relative to

authorization of purchase, recording of purchase, PPE schedules for assets.

2. Test to determine if depreciation is recorded and if a generally accepted

method has been consistently applied.

E. Presentation and Disclosure. Are PPE assets properly presented and are
footnote disclosures relating depreciation methods, collateralized assets, commitments
of assets, lease terms adequate?

1. Read financials.

2. Examine management representation letter for information concerning PPE.

NON CURRENT ASSET

1. Opening balance: Verify by reference to previous years balance sheet and

audit files.
2. Acquisition: Vouch the cost of acquisition with documentary evidence.

Vouch the authority for the acquisition with relevant documents

3. Disposal: Vouch the authority for disposal Examined documentation

Verify reasonableness of the disposal proceeds

Verify reasonableness of scrapping of non-current assets (e.g. scrap
value)
Accounting policy notes.

4. Depreciation: Vouch authorisation of depreciation policy

Examined adequacy and appropriateness of policy

Investigate revaluation
 Check calculations.

5. Internal control: Purchase, disposal

Accounting and maintenance of assets are very relevant.

6. Existence and ownership: Physical inspection of the existence of the assets

and inspect the title deed and certificates of ownership.

External verification e.g. bank letters, receivables circularisation

7. Presentation and value: Appropriate accounting policies must be adopted

Appropriate accounting standards must be adopted

Materiality level must be considered (e.g. in a balance sheet of large
company it would be misleading to show an asset such patent in a class
by itself it its total value was negligible in relation to other assets).
The classification of assets
The disclosure of an asset as separate items e.g. between non current
and current assets.