These are all physical items owned by a business; these may include Land, motor, buildings and other freehold property. Besides these physical assets there is also another class of assets referred to as intangible assets, this class contains such items as patents, copyrights and good will.
What the auditor does in looking for audit evidence is that he checks these particular items individually for things like physical location for those it can be verified. Items which may require verification are buildings and freehold property.
The auditor also considers amortizations for intangible assets such as goodwill and patents. The other class of assets is the Current assets that include fast moving goods of the business and other short term items of the business among these are the inventory, account receivables, and liquid money that is held by the business. It should however be noted that all the items may not involve the same methods of gathering the evidence as some tend to offer a complicated documentation process while others have a simpler system thus for the auditor to decide what method to use he has to consider each of these items and determine which of the items requires what method.
In the following discussion I wish to determine what method to use in each of the selected items in the current assets namely inventory and account receivables.
Under the examination method different modes are used by the auditor depending on the item involved. (Elder, Bisley and Arens 2008)
These require physical counts by the auditor to verify the amounts indicated in the records, this verification may involve several methods
- The client does the counting and the auditor simply observes and does test counting for some of the items.
-The auditor does literal counting for all inventories
Other procedures touching on inventory involve examination of purchase invoices and sales reports for a given period. Also determining whether the inventory is pledged or is subject to liens.
These all debts owned to the business what the auditor needs to check when it comes to these is whether some are overdue and also check on the ones that may look very s8uspicious.These may include recurrent accounts with very huge balances etc
Checking of these accounts mainly provide evidence on rights and obligations.
Advantage of this method of evidence gathering
The auditor gets first hand information, this