Lesson: Property, Plant, and Equipment Cycle

Instructor: Nick Palazzolo

This lesson addresses the property, plant, and equipment cycle and its connection to auditing procedures that deal with assertions like account balance, transactions, and presentation and disclosure. Nick Palazzolo, CPA, teaches how to verify completeness by tying fixed asset schedules together and trace fixed assets to sub-ledgers. The lesson also covers how to evaluate and allocate by recalculating the accumulated depreciation and assessing impairments. Additionally, the lesson details how to test for existence and occurrence, rights and obligations, and the various transactions related to fixed assets. Lastly, Nick presents methods to ensure appropriate presentation and disclosure, which includes reading footnotes and assessing them for material misstatements.

Updated: June 22, 2023 Create an account

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Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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P, P, and E, property, plant, and equipment. Let's talk about how we are going to enact procedures to help with our assertions. Well, we've got the account balance, transactions, and presentation and disclosure assertions. And we've got, for completeness, we're gonna foot the fixed asset schedule to the general ledger, dealing with a little bit of tracing there. You also say trace the schedule of additions and disposals to the fixed asset schedule. All these documents, all these separate listings, make sure they tie out together. Just as a general rule, if any of you work in the industry, you know, just have a check on every single work paper you do, as many checks as possible, making sure everything ties out. Lastly, you can trace the fixed assets to the sub-ledger. For evaluation and allocation, you could recalculate the accumulated depreciation, and evaluate any impairment, making sure that the P, P, and E, machines, trucks, are properly presented in their accurate value. To test the existence and occurrence, we're gonna wanna vouch additions in the sub-ledger to purchase documents, and making sure that we understand that vouching ties in with existence and occurrence. For rights and obligations, we're gonna examine any invoices, deeds, and title documents, also board of directors meetings. There's gonna be many options for a lot of these. Obviously, we're seeing them all throughout the entire lesson here, but there's just too many possible procedures you could do for all of these, so we mentioned some of the more important ones. Moving on to transactions. For completeness, we're gonna trace requisitions to perceived reports and the sub-ledger, and we wanna review the repair and maintenance account, lease agreements. We wanna see the repair and maintenance account if that ties in, right? That's gonna be something

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Business Cycles

Module: 5 Concepts, 74 Lessons

Revenue, Expenditure, & Cash Cycles Overview

0:24

Revenue, Expenditure, & Cash Cycles Objectives

1:48

Introduction to Revenue, Expenditure, and Cash Cycles

3:42

Assertions in Auditing