Audit procedures

In this lesson

1. 0:00 Audit procedures for PPE overview
2. 0:25 Testing opening balances and additions
3. 1:29 Auditing revaluations and depreciation
4. 2:02 Depreciation policy and recalculation tests
5. 3:30 Testing disposals and ownership rights
6. 4:04 Confirming rights and obligations
7. 5:21 Completeness and existence testing
8. 6:43 Existence versus completeness direction
9. 7:30 Completeness test question walkthrough
10. 9:06 Auditing intangible assets and development costs
11. 10:21 Amortisation and impairment review procedures

About this lesson

You'll explore specific testing techniques for each component of the PPE balance—opening balances, additions, revaluations, depreciation, and disposals—along with how to verify ownership rights and test for completeness and existence. This is essential knowledge for the Audit and Assurance module, where you'll need to demonstrate how auditors gather sufficient appropriate evidence to support their opinions on financial statements. The lesson breaks down practical audit procedures into manageable sections. For opening balances, you'll learn to agree figures to prior year audited statements. For additions, you'll see how to obtain schedules, cast them, and sample transactions back to supporting documentation to verify both accuracy and the capital versus revenue split. For revaluations, you'll check that valuations are performed by qualified professionals using appropriate bases. For depreciation—a key accounting estimate—you'll learn to review policies for changes, assess reasonableness of rates, recalculate charges on sample assets, and perform proof and total calculations. For disposals, you'll verify the profit or loss calculation and trace proceeds to the cash book. A critical concept covered is directional testing: completeness testing traces from physical assets to the accounting records to ensure nothing is missed, while existence testing traces from the records back to physical assets to confirm they're actually there and in use. You'll also explore how to verify rights and obligations through title deeds, external confirmations, and board minutes for capital commitments. The lesson concludes with procedures specific to intangible assets, including testing development expenditure against criteria, reviewing cash flow forecasts, inspecting contracts and licenses, and assessing impairment reviews and amortisation calculations.

Duration: 11m