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Chapter 15
Case Study
What are the problems in this case re
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Examination questions
(Note: These are abbreviated answers)
1(a)
Plant is required for use and provides an acceptable rate of return
Plant is recorded, safeguarded and complies with laws and
regulations
Plant is appropriately valued.
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(b)
Inspection
Observation
Enquiry
Reperformance
2
(a) Audit risks
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Inherent – assertion level
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Control risk
(b) Principal matters – instructions for physical inventory counting
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(c) Audit work – useful life
Tutorial note: ‘Indefinite’ does not mean ‘infinite’. Useful life reflects the level
of future maintenance expenditure required to maintain the asset at its
standard of performance assessed at the time of estimating its useful life.
(ICAEW)