Solutions i. Audit Programme Intangible Assets Audit Procedure Test the classification of all items listed as intangible assets.

. An intangible asset is an identifiable nonmonetary asset without physical substance. An item should only be classified as an intangible asset if that item meets i. the definition of an intangible asset ii. the recognition criteria as prescribed by IAS 38 Done By Reviewed By

Audit Objective Classification

Ownership

Verify that the client has ownership rights to intangible assets by examining supporting documentation and performing, as applicable, confirmation procedures with the appropriate agency (for example, patent office, licensing bureau). E xistence Verify the existence of the intangible assets by examining supporting documentation such as patent certificate from the relevant authorities and licensing agreements from component manufacturers. Valuation Are intangible assets separately recognized and recorded at estimated fair value? Are the valuation methodology employed and estimated lives assigned to intangible assets, particularly those assigned an indefinite life, reasonable? Give marks for format. Marks for any other related point. ii. To: Audit Manager From: Audit Senior Subject: Issues Arising From Audit of Non Current Assets of Gotts2BeKidding Ltd Date: 15th January 20XX

During our audit visit to Gotts2BeKidding Ltd, we noted the following issues and also make the following recommendations to correct them. These are issues we would like raised in the letter to management.

Issue identified The value of the land on which the offices and factories are built is not included in the asset register and in the financial statements New machinery acquired on 1st September 2013 has not been recognised in the financial statements. The new machinery is uninsured.

Implication Assets are understated

Recommendation The land belongs to the company and should be recognised as an asset at fair value regardless of the type of consideration for which it was acquired. The machinery should be recognised at cost and depreciation charged accordlingly.

Management Response

The motor vehicle donated for a sales promotion has been recognised as an asset.

Assets are understated. Depreciation is also understated as the charge for the new machinery is omitted. There are no safeguards against financial loss of the equipment. Assets are overstated.

The machinery should be insured to mitigate loss in the event that it is damaged. The motor vehicle donated for a sales promotion should not be recognised as an asset as the ownership is in dispute.

Regards Audit senior

(Give marks for format and expansion of main point and identification of issue)

iii. Recognition of assembly machinery valuation of cost: take into account the exchange rates prevailing at the time of purchase insurance good in transit ( is this why they were not recognised?) an explanation of when an asset should be recognised.

iv. Ethical issues on promotions vehicle. Not getting proper authority to run a promotion non compliance to the law Dispute on ownership with car dealer what the car was donated for was not done correctly. Should car have been returned? Importance of being good corporate citizen.