Question

PA 627

GOVERNMENT AUDIT

EXERCISE 4

Part 1

The Department of Transportation has purchased a large quantity of new desktop computers during the current fiscal year. An audit manager has asked you to audit the process used to acquire the computers. She also wants you to determine whether the computers have been used properly and accounted for correctly. The manager specified a set of audit objectives to guide your tests. Specifically she wants you to determine whether:

1. The purchases of the computers were properly authorized.

2. Responsibilities regarding the computers are properly segregated.

3. The computers, as well as the software and information they contain, are properly safeguarded. Consider both physical and logical access.

4. Laws and regulations regarding software usage have been complied with.

5. The computers recorded as being purchased actually exist.

6. All of the computers that were purchased have been recorded.

7. The amounts at which the computers are recorded are correct.

8. The estimated useful lives and salvage values of the computers are reasonable.

9. Depreciation expense was calculated correctly.

a. Describe the procedures you might use to gain an understanding of how the computers were acquired, used, and accounted for.

b. Describe the audit procedure(s) you might use to achieve each of the audit objectives listed above. Be specific.

Part 2

Review the Research Project Assignment Guidelines. Prepare a draft outline of the research paper about the audit function you have selected.

Answer 1

An audit manager has asked you to audit the process used to acquire the computers. Also wants you to determine whether the computers have been used properly and accounted for correctly. The amounts at which the computers are recorded are correct. In this case, we are auditing the acquisition of computer.

Firstly we should check that all assets or computers are purchased with the prior permission of appropriate authority, and the person who permitted the same is eligible for the same.

The custody and record for those computers are properly segregated, that no one individual can get control over those.

The purchase made is includes software, both hardware and software are properly safe physically as well as logical means.

Physical verification should also be done, not only recording in books is sufficient.

Computer should be used for the purpose for which they have been purchased. Should be recorded as per rule regarding accounting of assets or computer.

Applicable accounting treatment done for depreciation, salvage value should be proper and also useful life is proper. Depreciation should be calculated exact, and should be charged in books. Rate of depreciation should be as per law.