Wednesday, July 15, 2009


PROPERTY, PLANT AND EQUIPMENT (PPE) are very important assets of an organization and hereunder is an audit program in the examination of such assets:

Audit Objectives:

To establish the existence and ownership by the client of property, plant and equipment.
To ascertain that the basis at which property accounts are stated is acceptable and consistent with that of the preceding year
To determine that additions during the audit period are recorded and valued properly
To make certain that all dispositions of property whether transferred without cost or disposed have been properly authorized and recorded in the books
To ascertain that all properties in the hands of end-users are properly identified and handled or managed and corresponding Memorandum Receipts (MRs) are on file and acknowledged by them
To ascertain that totals per inventory report tally with balances appearing in the Balance Sheet
To ascertain whether all PPE are stated at cost less accumulated depreciation, and to determine whether depreciation of these assets had been properly and accurately computed.

Test of details of transactions and balances:

1. Vouch PPE additions to supporting documentation.
2. Vouch PPE disposals to supporting documentation.
3. Review entries to repairs and maintenance expenses.
4. Inspect PPE and additions thereto. Be alert to evidence of additions and disposals not included on agency’s schedules and to conditions that bear on the proper valuation and classification of the PPE.
5. Examine title documents and pertinent papers.
6. Evaluate fair presentation of depreciation expense by evaluating the appropriateness of useful lives and estimated salvage values set by the Commission on Audit.
7. Determine that PPE and related expenses, gains, and losses are properly identified and classified in the financial statements.
8. Determine the appropriateness of disclosures related to the cost, book value, depreciation methods and useful lives.

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