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Audits of financial statements are designed to determine whether account balances are materially;correct. Assume that your client is a manufacturing...

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Question

Audits of financial statements are designed to determine whether account balances are materially;correct. Assume that your client is a manufacturing company that has the following assets on its;balance sheet;? Machinery: $1,278,000;? Accumulated depreciation: $386,000;? Leased equipment: $550,000;a. Describe a substantive audit procedure that can be used to determine that all leased;equipment that should have been capitalized during the year was actually capitalized.;Please refer to the knowledge from intermediate accounting and the requirements of an;audit working paper to design a template audit working paper that can be used to examine;whether a leased equipment should have been capitalized or treated as lease expense;b. The machinery account shows that the company retire approximately $400,000 of old;machinery this year. Identify a substantive audit procedure that will determine the;machinery account was properly accounted for during the year;c. Assuming the auditor determines that the machinery were properly retired, what other;information does the auditor need to know to have reasonable assurance that the;machinery-net of depreciation-is properly reflected on the balance sheet?;d. How can an auditor determine that all the machinery and leased equipment on the account;actually exist?

 

Paper#76777 | Written in 18-Jul-2015

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