Tag (SQ): Asset register

You are an employee of Brighton & Co, a firm of Chartered Accountants. One of the firm’s clients is Prime Rentals, a car rental company whose shares are not traded on a stock exchange. The company has a large fleet of vehicles which it hires out on a contract basis.
The duration of a contract varies from one day to three months. Anybody wishing to hire a car must possess a valid driving licence. In addition, they must take out insurance with Prime Rentals.
You are involved in the audit of non-current assets for the year ended 31 December 20X8.
The company’s main non-current assets are:

• Freehold buildings
• Office equipment (mainly computers for office staff)
• Motor vehicles
  The company was formed ten years ago and all non-current assets (except for buildings) are maintained on a non-current asset register. The company depreciates non-current assets at the following rates:
• Freehold buildings – 2% on cost
• Office equipment – 20% on cost
• Motor vehicles – 50% on cost
  The company has recently revalued its buildings upwards by €2 million. The directors believe that they have fallen victim to a fraudster who has disappeared with a number of the company’s vehicles.
  Required:
  (a) Describe how you would verify the ownership of:
  (i) Freehold buildings
  (ii) Computers
  (iii) Motor vehicles.

  (b) Comment on the appropriateness of the depreciation rates of the non-current assets and their respective effect on the income statement.

  (c) List the contents of a non-current asset register and describe its usefulness for Prime Rentals.

  (d) Explain the accounting effect of the revaluation of the buildings to the financial statements and the audit work you would perform in this matter.