CASE 1 [TOPIC 2 - TOPIC 3] HMD Corporation operates a high ends manufacturing facility. The capital intensive nature of the corporation’s operations make internal control over the acquisition and the use of non current asset important management objectives.
CASE 1 [TOPIC 2 - TOPIC 3]
HMD Corporation operates a high ends manufacturing facility. The capital intensive
nature of the corporation’s operations make internal control over the acquisition and
the use of non current asset important management objectives.
At the beginning of every financial year, HMD prepares a non current asset budget that
would indicate the planning on their capital expenditure. To prepare this, managers
from each department would request capital expenditure from the senior management.
This requires them to complete a non current asset requisition form, which must be
approved by the senior management team. HMD has established PPE (property, plant
and equipment) guidance and policies that will determine whether the non current asset
requisition is to be considered as capital expenditure or revenue expenditure.
The management committee will meet each month to review the budget reports. Among
other things, the committee will also compare actual outcome incurred by the managers
to their
committee also reviews and approves any request for asset disposal.
The entire relevant document pertaining to fixed assets request will be forwarded to the
accounting department, including copies of vouchers used to document any
department’s requests for their asset disposal. As any other accounting department, they
are responsible to maintain all the company accounts including non current asset.
Among the policies of HMD, when an asset is acquired, it will be tagged for
identification and other necessary documentation. The important documentation is
needed for subsequent measurement and updating the non current asset ledger.
with the physical inventories of non current asset.
Required
A.Discuss the internal controls over non current assets at HMD, based on the
followings:
(i) Authorisation
(ii) Accurate transaction
(iii) Recorded transaction
(iv) Safeguard the assets
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