Question

Discuss ways that you as an auditor or fraud investigator might look for and hopefully discover manipulation of expenses relating to ammortization of tangible and intagible assets.

Answer 1

As an auditor or fraud investigator, the ways that can be looked for to discover manipulation of expenses relating to amortization of tangible and intangible assets are -

1. To enquire the management and staff regarding the existence of tangible and intangible assets by verifying their corresponding documents and physical existence of tangible assets.

2. To examine whether the amortization of intangible assets and depriciation of tangible assets is as per the prescribed accounting standards. To examine the correctness of life taken for tangible and intangible assets.

3. To examine the amortization of intangible assets and depriciation of tangible assets are same for accounting and for tax purposes.

4. If any asset is revalued, whether depriciation is charged to revaluation reserve account or not.

5. To examine whether the method of depriciation is constant or not. If the method is changed for any year, whether proper justification is given or not, that it is necessary for compliance with law, or necessary for better presentation.

6. Read the company's accounting policy regarding depriciation and amortization very carefully.

7. Whether proper accounting entries regarding depriciation and amortization is substantiated or not.

8. To conduct surprise tests for verifying the existence of assets.

9. To evaluate the nature of assets. To examine whether the current assets are not classified as fixed assets.

10. To make third party enquiries regarding purchase of assets.