The audit senior has asked you to perform analytical procedures to obtain substantive evidence on the reasonableness of recorded depreciation expense of the delivery equipment of a client. Changes in the account occurred pretty much evenly during the year. The estimated useful life is six years. Estimated salvage value is 10% of original cost. Straight-line depreciation is used. Additional information includes: Delivery Equipment (per General Ledger) Beginning Balance $380,500 Additions 154,000 Disposals (95,600) Ending Balance $438,900 Current year depreciation expense per books = $60,500. Based on this information, develop an expectation of the amount of depreciation expense for the year as part of a reasonableness test. Does the recorded depreciation expense seem acceptable? Explain. What is the impact of the result of this analytical procedure on other substantive procedures that the auditor may perform?
The audit senior has asked you to perform analytical procedures to obtain substantive evidence on the reasonableness of recorded
Delivery Equipment (per General Ledger)
Beginning Balance $380,500
Additions 154,000
Disposals (95,600)
Ending Balance $438,900 Current year depreciation expense per books = $60,500.
Based on this information, develop an expectation of the amount of depreciation expense for the year as part of a reasonableness test. Does the recorded depreciation expense seem acceptable? Explain. What is the impact of the result of this analytical procedure on other substantive procedures that the auditor may perform?
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