Auditing Fixed Assets vs' Accounts Receivable

1
Auditing Fixed Assets vs.Accounts Receivable

• Chapter 13
• Fixed Assets

2
Fixed Assets vs. AR

• 1. Similarities?
• Both require tests of clerical accuracy (making
  sure the lead schedule is accurate and ties into
  the G/L
• Both are assets so existence is an issue,
  however,
• 2. Differences?
• Fixed assets can be observed where AR needs to be
  comfirmed
• Completeness is more of an issue with FA since
  capitalizable items could end up in repairs and
  maintencne or handled as operating leases
• AR and sales are more prone to fraud

3
Fixed Assets vs. AR

• 2. Differences (cont)?
• Valuation is more subjective with AR because of
  estimating bad debts. With FA, valuation is an
  allocation issue, but mechanical tests and
  analytical procedures are still necessary
• Presentation is more of an issue with FA because
  there can be multiple classes of fixed assets,
  depreciation, and leases.
• 3. Similarities?
• Earnings can be manipulated in AR using cookie
  jar reserves whereas with FA they can be
  maniupluated by changing depreciation lives,
  salvage values, and depreciation methods.