Verification of Assets: General Principles Quiz

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In the Statement of Financial Position, the client will be making assertions that assets ______

exist

The auditor will need to obtain sufficient relevant reliable evidence to confirm the assertions made concerning these assets. This process is known as asset ______

verification

Verification of Assets is conducted mainly through substantive testing of transactions and balances to ensure that assets have not had their value ______

impaired

Common aspects of each asset which must be verified include confirming opening balances from the previous Statement of Financial Position and invoices to support ______ and disposals

additions Signup and view all the answers

Verification of Assets also involves obtaining reliable third-party confirmations from debtors or the bank to confirm the ______ of assets

existence Signup and view all the answers

Asset valuation in auditing requires verification that prepayments are in line with approved accounting policies and obtaining independent debtor confirmation to ensure the ______ of the assets

value Signup and view all the answers

Establish if standard is ______ (discuss with directors)

reasonable Signup and view all the answers

Auditing standard ______

cost Signup and view all the answers

Verify individual elements of ______ against actual records e.g. invoices, payroll, financial statements for overheads

cost Signup and view all the answers

Receivables Comprise » Trade Receivables » ______

Prepayments Signup and view all the answers

ISA 330 – ‘The auditors’ responses to assessed risks’ indicates that external confirmation procedures may assist the auditor in obtaining audit evidence with the high level of reliability that the auditor requires to respond to significant risks of material misstatement, whether due to ______ or error.

fraud Signup and view all the answers

Independent evidence as to the accuracy of Receivables balances can be obtained by means of a Receivables verification letter sent to a sample of customers. This requires the permission of the client. If it is not given, the auditor should ______ why.

evaluate Signup and view all the answers

Verification of Assets: General Principles mnemonic CAVEBOP stands for Cost, Authorisation, Value, Existence, Beneficial Ownership, ______, Presentation

Procedures Signup and view all the answers

Audit Importance of pre-planning for critical events includes sending off Receivables circularisation, bank letter, attending stock take, and other audit problems requiring audit pre-planning such as effects of restrictions on available staff, availability of specialist staff, and unforeseen problems like ______

fraud Signup and view all the answers

Non-current assets include Intangible assets, Tangible assets, Investments, Tangible assets, Property plant and equipment. Need to verify Existence, Rights and obligations, Occurrence, Completeness, Valuation, Measurement, ______, Presentation and disclosure

Impairment Signup and view all the answers

Audit procedures for Rights and obligations in non-current assets include inspecting title deeds and leases, obtaining third party confirmation, inspecting purchase invoices/finance leases/contracts for additions, checking for evidence of mortgages or secured loans, and inspecting directors minute book for evidence of transactions involving assets – ensuring all additions and disposals are properly ______

authorised Signup and view all the answers

Audit procedures for Occurrence in non-current assets involve gathering evidence from directors minute book, purchase/sales invoices, leases/contracts, etc to ensure transactions actually ______

occurred Signup and view all the answers

Audit procedures for Valuation and measurement in non-current assets include reviewing depreciation calculations, checking the fixed asset register, verifying the basis of valuation of assets shown at valuation, discussing with directors any diminution of values, checking capitalisation of interest, VAT, etc, checking for inclusion of overheads in self-built assets, and assessing the possibility of ______ of value

impairment Signup and view all the answers

Impairment of value refers to the higher of fair value less selling costs or value in use, with the latter being the present value of future cash flows expected to be derived from the asset or cash generating unit. Cash generating unit is the smallest identifiable group of assets that generate cash inflows largely independent of inflows from other assets or group of assets. Management must indicate if there is any impairment of value, and auditors must audit any review conducted. The key audit area is estimating the recoverable amount, which may require subjective estimation. If either fair value or value in use is higher than the carrying value, then the asset value is not ______

impaired Signup and view all the answers

Impairment of assets review is a key audit area as it may be subjective. Noting that Net Realizable Value (NRV) is only calculable if there is an active market for the items, if there isn’t, the auditor may have to calculate value in use. The audit of value in use calculation involves re-performing the calculation, comparing cash flows projected to other budget and cash flow projections, and considering the long-term average growth rate projected – external sources may need to be consulted. The main focus is on determining if the asset's value is ______

impaired Signup and view all the answers

Auditors need to verify the Existence, Rights and obligations, Occurrence, Completeness, Valuation, Measurement, and Presentation of non-current assets. Verification procedures include physically inspecting the assets, checking insurance documents, checking vehicle log books, inspecting title deeds and leases, obtaining third party confirmations, inspecting purchase invoices and finance leases, and checking for evidence of mortgages or secured loans. Additionally, auditors need to inspect directors minute book for evidence of transactions involving assets to ensure all additions and disposals are properly ______

documented Signup and view all the answers

Auditors must review the depreciation calculations, check the fixed asset register, assess the basis of valuation of assets shown at valuation, discuss with directors any diminution of values, check the capitalization of interest, VAT, etc, verify the inclusion of overheads in self-built assets, and consider the possibility of impairment of value. Impairment of value refers to the higher of fair value less selling costs or value in use, with the latter being the present value of future cash flows expected to be derived from the asset or cash generating unit. Net Realizable Value (NRV) is only calculable if there is an active market for the items. If either fair value or value in use is higher than the carrying value, then the asset value is not ______

impaired Signup and view all the answers

Verification of Assets: General Principles Quiz

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Questions and Answers

In the Statement of Financial Position, the client will be making assertions that assets ______

The auditor will need to obtain sufficient relevant reliable evidence to confirm the assertions made concerning these assets. This process is known as asset ______

Verification of Assets is conducted mainly through substantive testing of transactions and balances to ensure that assets have not had their value ______

Common aspects of each asset which must be verified include confirming opening balances from the previous Statement of Financial Position and invoices to support ______ and disposals

Verification of Assets also involves obtaining reliable third-party confirmations from debtors or the bank to confirm the ______ of assets

Asset valuation in auditing requires verification that prepayments are in line with approved accounting policies and obtaining independent debtor confirmation to ensure the ______ of the assets

Establish if standard is ______ (discuss with directors)

Auditing standard ______

Verify individual elements of ______ against actual records e.g. invoices, payroll, financial statements for overheads

Receivables Comprise » Trade Receivables » ______

Independent evidence as to the accuracy of Receivables balances can be obtained by means of a Receivables verification letter sent to a sample of customers. This requires the permission of the client. If it is not given, the auditor should ______ why.

Verification of Assets: General Principles mnemonic CAVEBOP stands for Cost, Authorisation, Value, Existence, Beneficial Ownership, ______, Presentation

Non-current assets include Intangible assets, Tangible assets, Investments, Tangible assets, Property plant and equipment. Need to verify Existence, Rights and obligations, Occurrence, Completeness, Valuation, Measurement, ______, Presentation and disclosure

Audit procedures for Occurrence in non-current assets involve gathering evidence from directors minute book, purchase/sales invoices, leases/contracts, etc to ensure transactions actually ______

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