Describe your audit approach for property, plant and equipment.

What the interviewer wants to hear

• Agrees the fixed asset register to the ledger
• Vouches additions and checks capital versus revenue
• Tests disposals and gains or losses
• Checks depreciation and useful lives
• Verifies existence, title and impairment indicators

Model answer

I begin by agreeing the fixed asset register to the general ledger by class, and preparing a movement schedule of opening balance, additions, disposals, depreciation and closing balance. For additions, I vouch a sample to invoices, contracts and approvals, check that the costs are capital in nature and capitalised from the right date, and look at repairs and maintenance for items that should have been capitalised. For disposals, I check approvals and sale proceeds, recalculate the gain or loss and make sure the asset was removed. For depreciation, I test the rates against policy and Schedule II, perform a proof in total and check useful lives are reasonable. For existence and rights, I physically inspect selected assets and check title deeds and vehicle registrations, which also supports CARO reporting. Finally, I consider impairment indicators like idle assets and review capital work in progress for delays.

More medium Auditor questions

• You are planning the audit of a new client. How do you understand the business and assess risks?
• Walk me through how you attend a client’s physical inventory count.
• How do you run an external confirmation process for receivables, and what if customers do not reply?
• How do you design an audit sample, and what affects the sample size?
• How do you perform journal entry testing to address the risk of management override?
• How would you audit trade receivables at year end?
• How would you audit payroll expense for a company with 500 employees?
• Why and how would you reconcile revenue in the books with GST returns during an audit?
• What do you communicate to the audit committee during and at the end of an audit?