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ICCT Colleges Foundation, Inc

The document provides guidance on internal controls that could help prevent misstatements in property, plant, and equipment accounts. It lists 5 examples of potential misstatements and suggests internal controls for each, such as comparing depreciation expense amounts to previous years, verifying asset additions and removals, and taking periodic physical counts of tools. The overall message is that proper internal controls like review and verification processes can help ensure property accounts are accurately reported.

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Sheen Catayong
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179 views1 page

ICCT Colleges Foundation, Inc

The document provides guidance on internal controls that could help prevent misstatements in property, plant, and equipment accounts. It lists 5 examples of potential misstatements and suggests internal controls for each, such as comparing depreciation expense amounts to previous years, verifying asset additions and removals, and taking periodic physical counts of tools. The overall message is that proper internal controls like review and verification processes can help ensure property accounts are accurately reported.

Uploaded by

Sheen Catayong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

ICCT Colleges Foundation, Inc.

CORPORATE GOVERNANCE, BUSINESS ETHICS, RISK MANAGEMENT and


INTERNAL CONTROL (CAE01)

CHAPTER 9 - ACTIVITY

ESSAY:

Direction: Explain the following statements/question in not less than 5 sentences.

For each of the following misstatements in property, plants and equipment accounts, state an
internal control that the client could install to prevent the misstatement from occurring.

1. The asset lives used to depreciate equipment are less than reasonable, expected useful
lives.
- Government study depreciation tables and multiplying undepreciated fixed assets
with depreciation rate for the year.
2. Capitalizable assets are routinely expensed as repairs and maintenance, perishable tools,
or supplies expense
- Establishing some type of process where you can easily dictate which items require
capitalization and internal verification procedures and large amounts should be
debited to Repairs and Maint or other expense account. Test all expense charges to
these accounts that exceed a certain amount.
3. Construction equipment that is abandoned or traded for replacement equipment is not
removed from the accounting records.
- Make a point to have internal teams verify the recording of these acquired properties
and check the entries in property accounts with vendor’s invoices.

4. Depreciation expense for manufacturing operations is charged to administrative expenses.


- Compare depreciation expense for administration and manufacturing to previous
years
5. Tools necessary for the maintenance of equipment are stolen by company employees for
their personal use.
- Assign tools to the foreman him or herself and record the count of tools periodically.
Have a discussion with personnel and also refer to data of preceding year. Check the
client's physical count of the tools.

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