Accounting Auditing Case – Case Study Example
Accounting Auditing Case Auditor’s work in forming an opinion on the financial ments consists of obtaining and evaluating evidence about managements assertions that are embodied in those statements. In order to be able to express an opinion on financial statements the auditor must establish specific audit objectives related to those assertions and then design and perform audit tests to obtain and evaluate evidence about whether the objectives have been met. In the financial reporting a lessee entity is classified under finance lease and which is required to be judged on the basis of substance transaction.
In this case Auditors should actually check or test charges in the capital account which should clearly reveal that the large amount of expense being capitalized. In addition, the vouching process of these lease charges auditors should make sure that they enquire on whether they are properly they are capitalized in the context of long term assets.
For the auditor to be able to determine that the machinery account was properly
accounted for during the year, the following notes will apply (Michigan., Michigan., & Michigan. 2005). Ensure that all the financial lease of the machinery is recorded in the balance sheet and classified appropriately. The other important approach is to make sure that all the depreciation expense as well as the interest expense that relates to financial lessee on the operating lessee are properly calculated and recorded accordingly in the income statement. Finally, the finance lease footnote disclosure should be ascertained that they are adequate and comply with the disclosure of IAS 17 requirements.
All the auditing procedures concerning lease obligations comprise of a principal careful study of the lease documents to define the substance of the contract and the appropriate accounting treatment. It is easy for an auditor to identify that all the leased equipment’s exist following that in the course of the examination the auditor normally prepares provisions of each lease for own permanent file operational papers documentation.
Michigan., Michigan., & Michigan. (2005). Audit report: Performance audit of the space planning and leasing process, Department of Management and Budget. Lansing: Michigan Office of the Auditor General.