The auditor must obtain sufficient appropriate audit evidence to determine whether PPE has been properly recorded and disclosed in the financial statements.
Audit objectives can be divided into three groups:
- Transaction-related objectives
- Balance-related objectives
- Presentation and disclosure objectives
These objectives apply to transactions such as purchases and disposals of PPE during the year.
| Assertion | What the Auditor Wants to Confirm | Example |
|---|---|---|
| Occurrence | Recorded additions and disposals genuinely happened | A machine recorded as purchased was actually acquired |
| Completeness | All PPE purchases and disposals have been recorded | A lorry sold during the year has been removed from the PPE register |
| Accuracy | Transactions have been recorded at the correct amounts | A machine costing RM80,000 is not recorded as RM8,000 |
| Cut-off | Transactions are recorded in the correct accounting period | Equipment received after year-end is not recorded as a current-year purchase |
| Classification | Transactions are recorded in the correct accounts | Routine repair costs are recorded as expenses, not as new machinery |
Conclusion
For PPE transactions, ask:
Did the transaction happen, was everything recorded, was the amount correct, was it recorded in the correct year, and was it placed in the correct account?
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