Audit Procedures for Property, Plant, and Equipment

Audit Procedures for Property, Plant, and Equipment
The necessary procedures for Property, Plant, and Equipment (PPE) audits include existence, occurrence, completeness, and accuracy. Occurrence procedures are anchored on ensuring that the PPE balance recognized within the firm’s financial statements is actually present when reporting is done. Any disposal or addition of assets would represent the asset acquired, scraped, or sold within the reporting year. One of the vital audit procedures related to completeness assertion entails ensuring that the PPE recorded on the financial statement incorporates PPE transactions during the particular period. Additionally, any add-ons or disposal costs incurred within the year would have been reported. Lastly, the audit should be accurate to ensure all asset disposals or additions are correctly reported and recorded (Accounting Hub, n.d.).
The auditing process should evaluate the fairness of the company’s depreciation attributed to its PPE. It is anticipated that the depreciation rate would coincide with PPE’s ability or fixed assets’ ability to contribute to business inflows positively. In addition, the auditing process should establish the rate of asset depreciation compared to the local government or taxman’s provided rate. Auditing of PPE also offers evidence that buildings, land improvements, equipment, and machinery have a limited product life, and thus their value deterioration is attributed to depreciation (International Federation of Accountants, 2021). For example, a company’s administration center complex is an asset that is expected to drop in value over its useful life. As the depreciation of the administration complex is recorded, the building value is likely to drop as the auditor recognizes the depreciation (CFI Team, 2022). The company auditors recognize the building expenses across its economic life. Notably, depreciation on PPE should be credited to the accumulated depreciation account and debited on the depreciation expenses account (Hall, n.d.). The accumulated depreciation balance continues to ...