Topic 11 verification of balance sheet items

1. TOPIC 11: VERIFICATION OF
BALANCE SHEET ITEMS
References: Chapter 19 & 21
AUD390 2014
AUDITING AND ASSURANCE
SERVICES
IN MALAYSIA

2. AUDIT OF
PROPERTY, PLANT &
EQUIPMENT
AUD390 2014
 Reasons need to audit:
Fewer time involved in purchasing fixed assets
The amount of each purchase normally material
The fixed asset is likely to be kept & maintained in the
accounting records for several years
 Refer Notes on Audit of PPE

3. AUDIT OF INVENTORY
AUD390 2014
 Factors effecting the complexity of the audit of inventory
 It is a major item on the balance sheet, & often the
largest item making up the accounts included in
working capital
 Inventory in different location, which make physical
control & counting difficult
 Diversity of the items in inventory, such as jewels,
chemicals & electronic parts
 Difficulty in valuation due factors such as obsolescence
& the need to allocate manufacturing cost to inventory

4. Cont…
AUD390 2014
 Main control issues:
1. Physical Control
• Adequacy of the physical control over inventory
(raw material, work-in-progress, finish good)
• Restriction on the accessibility of the inventory
• Competent custodian of the inventory
2. Documents & Records For Transferring Inventory
• Adequate number of documents to verify the
transferring process (PO, Receiving Report, SO,
SI)
• Recording of transactions in relevant accounts
• Refer Notes on Audit of Inventory