PSG has a policy of revaluing land and buildings; this is undertaken on a rolling basis over a five-year period. During the year PSG requested an external independent valuer to revalue a number of properties, including a warehouse purchased in January 2020. Depreciation is charged on a straight-line basis. Work in progress PSG undertakes continuous production of cars, 24 hours a day, seve
SG Motor Cars Co (PSG) manufactures a range of motor cars, and its year end is 30 June 2020. You are the assistant audit manager of Intermiami & Co and are currently preparing the audit programmes for the year-end
audit of PSG. You have had a meeting with your audit manager, and he has notified you of the following issues identified during the audit risk assessment process:
Land and buildings
PSG has a policy of revaluing land and buildings; this is undertaken on a rolling basis over a five-year period. During the year PSG requested an external independent valuer to revalue a number of properties, including a
warehouse purchased in January 2020.
Work in progress
PSG undertakes continuous production of cars, 24 hours a day, seven days a week. An inventory count is to be undertaken at the year end and Intermiami & Co will attend. You are responsible for the audit of work in
progress (WIP) and will be part of the team attending the count as well as the final audit. WIP constitutes the partly assembled cars at the year end and this balance is likely to be material. PSG values WIP according to
percentage of completion, and
Describe the substantive
(i) The revaluation of land and buildings and the recently purchased warehouse; and
(ii) The valuation of work in progress.
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