Learn how auditors should verify plant and machinery to ensure accuracy in financial statements. Follow these steps for a reliable audit process.
How Auditor Should Verify Plant and Machinery
The auditor should verify the plant and machinery in following ways:-
PHYSICAL EXISTENCE
The auditor may examine the physical existence of assets. He must check the registration number of plant and machine with the assets registers and purchase documents.
CORRECT VALUATION
The auditor may examine that its value is properly made as per requirement of companies ordinance 1984. After adding the capital expenditures and deducting the disposals and accumulated depreciation, we will find the net value of the asset.
VALID OWNERSHIP
The auditor must verify that plant and machinery is registered in the name of business. The registration in any other name is not acceptable at all.
DEPRECIATION
The auditor should see that plant and machinery is properly depreciated. The appropriate rate of depreciation as per requirement of International Standards on Auditing * is 15%.
AUTHORIZATION
The plant and machinery must be bought or sold by the authorized person. The auditor can verify the authorization through study of directors minutes book.
DISCLOSURE
The auditor can verify that plant and machinery is disclosed according to the requirements of companies ordinance 1984.
When an auditor verifies plant and machinery, they perform several key steps to ensure that the assets are properly recorded and maintained by the company. In conclusion, verifying plant and machinery is a crucial aspect of the audit process. By following the steps outlined in this article, auditors can ensure that these assets are accurately valued and accounted for in the financial statements.
This not only helps to provide assurance to stakeholders but also ensures compliance with accounting standards. As auditors continue to face increasing scrutiny, it is essential that they pay close attention to the verification of plant and machinery to maintain their reputation for accuracy and reliability.