Auditing and Assurance revision question and answer

Auditing and Assurance Revision Questions and Answers

As an independent financial auditor, how would you deal with the following situations?

a. An enterprise changes the method of depreciation from written down value method to straight line method.
Answer
In this case, I will first evaluate whether this change has been done due to any of the following reasons:

i. as required status, or
ii. as required Accounting Standard/ Financial Reporting Standards, or
iii. if the change will result in a more appropriate presentation of transactions in the financial statements

If change has been done due to above reason, depreciation should be recalculated in accordance with the use. The deficiency or surplus of depreciation arising from the change of method should be taken to the profit & loss account. Suitable disclosure about the change in the depreciation method should be made in the financial statement.



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