MARKRICH SPORTSWORLD, INC.

F-1
AUDIT PROGRAM
PROPERTY, PLANT, and EQUIPMENT
December 31, 19X2

By Ref. Remarks

1 Review and evaluate internal controls for property, plant, and CH F-2; F-3
equipment

Obtain or prepare analysis of asset groups and accumulated

2 depreciation presenting beginning and ending balances, CH F-12
additions, and disposals.
3 Trace beginning balances to prior workpapers CH

4 Examine supporting documents for major acquisitions and CH F-12

inspect selected assets

5 CH F-9, F-10
Examine supporting documents for disposal or retirements.

6 Prepare analysis of repair and maintenance expenses and CH L-5

review documentation to identify possible capital assets.

7 CH F-12
Test depreciation calculations and trace to expense account

8 Ascertain agreement between control account and subsidiary CH

ledger

9 Review gains or losses on disposals and trace to appropriate CH F-11

account.

10 Review adequacy of insurance coverage for plant, property, CH E-4, E-6

and equipment.
11 Review property tax expense documents. CH
12 Ascertain proper financial statement presentation. CH
 MARKRICH SPORTSWORLD, INC.
F-2
PROPERTY, PLANT, and EQUIPMENT

Yes No Remarks

1 Are proposals for capital acquisitions submitted in writing? √ 13

2 Are capital acquisitions made only after authorization by √ 14

board of directors or other appropriate personnel?

3 Is there a policy for approval of acquisitions in excess of

those amounts listed in the original capital budget? N/A; There is no
formal budget
4 Are competitive bids solicited when feasible? √
5 Are purchasing, receiving, and recordkeeping for √
properties performed by different personnel?

6 Is a subsidiary ledger maintained and periodically √

reconciled with control accounts?

7 Is there a policy for differentiating between expenses and √

capital expenditures?
8 Are properties tagged with identification numbers? √

9 Is there a systematic, complete physical inventory of Client has only

properties on a scheduled basis? √ consignment out

10 Are there adequate physical safeguards such as alarm √

systems, fences, and security personnel?
11 Are appropriate employees bonded? √
12 Is the insurance coverage periodically reviewed? √
13 Are there formal policies for assigning economic lives,
salvage values, and depreciation methods? √
 MARKRICH SPORTSWORLD, INC.
F-3
PROPERTY, PLANT, and EQUIPMENT

Yes No Remarks

Are there formal policies for reporting disposals of properties? √

Is written authority required before properties are physically

removed? √
 MARKRICH SPORTSWORLD, INC. F-9
AUTOS AND TRUCKS-ACQUSITIONS CH
DECEMBER 31, 19X2 1-30-X3

COST ACCUMULATED DEPRECIATION

DEPRECIATION EXPENSE
Automobile
1-1-X2 Balance $ 8,000 √ $ 1,800 √
19X2 Expense $ 1,800 $ 1,800
12-31-X2 Balance $ 8,000 $ 3,600 $ 1,800

Trucks
1-1-X2 Balance $ 12,000 √ $ 2,700 √
19X2 Expense (6mo) $ 1,350 $ 1,350
Balance before trade $ 12,000 $ 4,050 $ 1,350
Acquisition on 7-7-X2
Two delivery trucks $ 23,950
Less trade in $ (12,000) $ (4,050)

19X2 Expense-new trucks

($23,950-$2,395)x1/4x1/2 $ 2,694 $ 2,694
$ 23,950 $ 2,694 $ 4,044

Total Balance at 12-31-X2 $ 31,950 $ 6,294 $ 5,844

Basis for new trucks

Invoice price $ 24,600 µ
Tax $ 400 µ $ 25,000
Less trade-in allowance $ 9,000 µ
Cash price $ 16,000 ∆
Cost of truck traded $ 12,000
Less accumulated depreciation $ 4,050 $ 7,950
Basis for new trucks $ 23,950 Χ

√ Agreed to ending balances at 12-31-X1. CH

µ Agreed to vendor's invoice. CH
∆ Examined approved voucher and cancelled check (amount was less than the $18,000 approved by Board
of Directors). CH
Χ Inspected new trucks. CH
 MARKRICH SPORTSWORLD, INC. F-10
FURNITURE AND FIXTURES-ACQUSITIONS CH
1-30-X3
DECEMBER 31, 19X2

COST ACCUMULATED DEPRECIATION

DEPRECIATION EXPENSE
1-1-X2 Balance $ 25,500 √ $ 5,100 √

Furniture and fixtures

which remained Unchanged
19X2 Expense :
($24,600-$4,920)x0.2 $ 3,936 $ 3,936

Acquisition on 8-10-X2
Two display counters Χ $ 1,600
Less trade in $ (500) $ (147)
19X2 Expenses-old counters
($500-$100)x0.2x7/12 $ 47 $ 47
19X2 Expenses-new counters
($1,600x0.2x5/12) $ 133 $ 133

AJE to record charges

for installation $ 600
19X2 Expenses
$600x0.2x5/12 $ 50 $ 50

Acquisition on 10-30-X2
Two calculators Χ $ 1,017
Less trade-in $ (400) $ (133)
19X2 Expense-old calculators
(S400-$80)x0.2x10/12 $ 53 $ 53
19X2 Expense-new calculators
$1,017x0.2x2/12 $ 34 $ 34

Total Balances at 12-31-X2 $ 27,817 $ 9,073 $ 4,253

√ Agreed to ending balance at 12-31-X2. CH

Χ Inspected new assets. CH

GAIN/LOSS AND BASIS FOR ACQUISITION
DISPLAY COUNTERS
Invoice Price
Tax
Less trade-in allowances
Cash Price
Cost of Counters Traded
Less accumulated deprec.
Less recognized Loss
Basis before AJE
AJE For Installation
New Basis
CALCULATORS
Invoice Price
Tax
Less trade-in allowance
Cash Price
Cost of Calculators Traded
Less accumulated deprec.
New basis
µ Agreed to vendor's invoice. CH
∆ Examined approved voucher and cancelled check (amount was within approved limit by Board of Directors). CH
MARKRICH SPORTSWORLD, INC. F-11
CH
1-30-X3
DECEMBER 31, 19X2
NEW BASIS BOOK VALUE (GAIN)
LOSS
$ 1,550 µ
$ 50 µ $ 1,600
$ 300 µ $ 353 $ 53
$ 1,300 ∆
$ 500
$ 147 $ 353
$ (53)
$ 1,600
$ 600
$ 2,200
$ 1,020 µ
$ 30 µ $ 1,050
$ 300 µ $ 267 $ (33)
$ 750 ∆ (not recognized)
$ 400
$ 133 $ 267
$ 1,017
 MARKRICH SPORTSWORLD, INC. F
PROPERTY, PLANT, AND EQUIPMENT CH
2-1-X3
DECEMBER 31, 19X2

ASSETS ACCUMULATED DEPRECIATION

FINAL PER BOOKS ADJUST- FINAL RATE METHOD FINAL PER BOOKS ADJUST- FINAL
12-31-X1 12-31-X2 MENTS 12-31-X2 12-31-X1 12-31-X2 MENTS 12-31-X2

202 Land $ 42,000 $ 42,000 $ 42,000

203 Building $ 400,000 $ 400,000 $ 400,000 2.5% SL $ 9,000 $ 18,000 $ 18,000

205 Furniture and Fixtures $ 25,500 $ 27,217 $ 600 $ 27,817 20% DDB $ 5,100 $ 9,023 $ 50 $ 9,073

207 Automobiles and Trucks $ 20,000 $ 31,950 $ 31,950 25% SL $ 4,500 $ 6,294 $ 6,294

AJE
1 Furniture and Fixtures $ 600
Installation Expense $ 600
2 Depreciation Expense $ 50
Accumulated Depreciation $ 50

Based on the results of the audit tests performed and the study of internal
controls, it is my opinion that property, plant, and equipment at 12-31-19X2
is fairly stated if. CH
 MARKRICH SPORTSWORLD, INC. L-5
REPAIRS AND MAINTENANCE EXPENSE CH
DECEMBER 31, 19X2

Voucher VENDOR DESCRIPTION AMOUNT

#
2- 062 Brown Auto Service Automobile service and repairs $ 120 √
3- 142 Courtesy Equipment Maintenance contract on office equipment $ 75 √
j
6- 132 $ 75 √
j
9- 402 $ 75 √
j
8- 172 Fox Retail Equipment New display counters installation charges $ 600 ∆
√
12- 082 Brown Auto Service Service on delivery trucks $ 130 √
Miscellaneous charges $ 125
$ 1,200 Χ

Schedule prepaid by client

√ Examined approved vouchers cancelled checks and vendors invoices. CH

∆ Approval for equipment acquisition traced to board of directors minutes. CH
j Examined service contract. CH
Χ Footed. CH
 MARKRICH SPORTSWORLD, INC. E-4
PREPAID INSURANCE CH
2-1-X3
DECEMBER 31, 19X2

1-1-X2 19X2 19X2 12-31-X2

PREPAID ADDITIONS EXPENSE PREPAID
BALANCE BALANCE


Policy #131313 General Insurors Insurance, Co.
(Agent : Worldwide)
Workmen's Compensation
Limits of $75M/$500M;2-2-X1 to 2-2-X3 $ 650 χ $ 600 $ 50


Policy #010101 Worlwide Insurance Co.
(Agent : Worlwide)
Fire, product liabilit, blanket-all-perils
Limits of $1,000,000;2-28-X2 to 2-28-X3 $ 400 χ $ 2,400 Ö $ 2,400 $ 400


Policy #A5377 Worlwide Insurance Co.
(Agent : Worlwide)
Auto and truck comprehensive coverage
Limits of $100M/$500M;4-1-X2 to 4-1-X3 $ 210 χ $ 840 √ $ 840 $ 210

Balance in Ledger at 12-31-X2 before adjustment $ 1,260 µ $ 3,240 µ

Balance in Ledger at 12-31-X2 after adjustment $ 3,840 µ $ 660 µ
E

AJE (1)
Insurance Expense $ 600
Prepaid Insurance $ 600

j Confirmed details of policy, including premiums. CH

Ö Examined approved vouchers, premium notices, cancelled checks and insurance policies. CH
χ Agreed to prior year workpapers. CH
µ Footed. CH