(a) Initial audit procedures
Clerical accuracy
This schedule has been prepared by the company’s accountant. If I am to use the schedule as the basis for planning and performing my audit, I must first ensure that it is correct in accordance with the company’s books and records. I would, therefore:

• verify the schedule to and from accounts recorded in the nominal ledger and with the draft financial statements;
• check the correctness of additions and other calculations on the schedule.
  The basis for this procedure is that of professional scepticism which requires making no presumption as to the accuracy of information provided by management.

Opening balances
I would check that the opening balances are in agreement with the balances in the previous year’s audit file. This is for two reasons:

• To ensure that any amendments to the previous year’s closing balance agreed at audit had been properly recorded in the company’s books and records.
• With plant and equipment, most audit procedures are applied to transactions that change the balance. Reliance is placed on audit procedures performed in previous years in verifying assets brought forward at at the beginning of the year.

(b) Audit procedures re additions
Existence

• Vouch additions to suppliers’ invoices.
• Examine goods inward notes or evidence confirming delivery of the items.
• Examine purchase orders, requisitions, and other evidence, such as Board approval, that the purchase had been properly authorised.
• Physically examine some of the items confirming description and serial numbers to the invoice.

Completeness

• Analyse repairs and maintenance to ensure that no items charged to this account should have been capitalised.
• Scrutinise the company’s capital budget and capital commitments recorded in the previous year’s financial statements for details of proposed additions.

(c) Scope of work
I would obtain a copy of the valuer’s report and:

• check that the valuation given in the report is consistent with the valuation recorded in the financial statements;
• check that the basis of valuation is consistent with an acceptable basis of financial statement valuations, such as open market value and, in particular, that it relates to the property as it is and does not anticipate future uncertain events such as rezoning for planning, new roads, etc.; and
• form a view as to how thoroughly the valuer has undertaken his or her work.
  Although the valuer was an employee of the company, I would need to ensure that no undue restriction was placed on the valuer’s access to relevant information having a bearing on the valuation.

Assessing the work of the valuer
When reviewing the work of the valuer, I would expect to see the basis of the valuation explained and justified in the report. Where practicable, I could confirm any data used, such as recent transactions involving similar property. I could also consider the reasonableness of any assumptions made concerning which I have some knowledge, such as the effect of recent changes in legislation or in the economic climate.

Conclusion
If I find that:

• the valuer is professionally qualified, and sufficiently experienced,
• the scope of the work is adequate; and
• other evidence corroborates the reliability of the valuation,
  I would probably be prepared to accept the work of the valuer as an expert providing sufficient appropriate evidence as to the valuation of the property. My confidence in the valuation would be enhanced if it were an interim valuation subject to periodic confirmation by independent valuers.

(d) Accumulated depreciation
According to IAS 8, the correction of misstatements which are the natural result of estimates inherent in the accounting process are normally dealt with in the statement of comprehensive income in the period in which they are identified. This would appear to be the accountant’s argument.
An alternative view is that this is a fundamental error and the cumulative adjustments applicable to prior periods have no bearing on the results of the current period. In this case, as a prior period adjustment, the benchmark treatment required by IAS 8 is to adjust the opening balance of retained earnings and to amend the comparative figures for the previous accounting period. However, the accountant’s proposed treatment is consistent with the allowed alternative treatment providing it is accompanied by additional pro forma information as required by the benchmark treatment.