Module C (Jun 12)_Answer.pdf

Module C (June 2012 Session) Page 1 of 11 SECTION A – CASE QUESTIONS (Total: 50 marks) Answer 1(a) Existence and completeness due to certain significant controls over fixed asset registration were not properly implemented by the operation team; Valuations due to certain significant control over fixed asset valuation were not properly implemented by the operation team. Answer 1(b) In response to the assessed risks of the fixed assets described in 1(a), ABC Co. should consider whether the audit procedures are affected in terms of scope (e.g. additional procedures required) and extent (e.g. more sample sizes) in response to the risk identified. Some audit procedures are suggested below: Existence Completeness ? Understand the scope of the Internal Audit investigation report, e.g. location, business processes and controls. ? Understand from the Internal Audit and management the root cause of the control deficiencies identified and reassess the risk of material misstatement to fixed assets. ? Confirm that Super Energy physically inspects all items in the fixed asset register at year end. ? Inspect high value items from the fixed asset register at year end. Confirm the items inspected exist and are in good condition and have correct serial numbers. ? Confirm that Super Energy reconciles opening and closing assets by serial numbers as well as amounts. ? Obtain the fixed asset register with gross book value, accumulated depreciation and net book value, and reconcile with the opening position. ? Compare the fixed asset balance in the general ledger with the fixed assets register and obtain explanations for any differences. ? For a sample of fixed assets which physically exist, confirm that they are recorded in the fixed asset register. Module C (June 2012 Session) Page 2 of 11 Valuation ? Understand the scope of the Internal Audit investigation report, e.g. location of the exploration and prod