Repairs and maintenance Assume that an auditor determines that a client's policy related to recording repairs and maintenance is reasonable, but the auditor has concerns about whether the policy is adhered to. What might cause such concerns and how will the auditor adjust the substantive procedures to be performed?
Some clients might be motivated to record some asset purchases as an expense in order to reduce taxable income. Management might attempt to not comply with the policy because of incentive to manipulate reported earnings, for example, decrease reported earnings in a good period and vice versa in a poor period. These incentives might arise because of compensation plans.
If the auditor perceives that such risks are applicable to a particular client, the auditor will adjust the procedures, usually by requesting that the client prepare a schedule of both fixed-asset additions and repair and maintenance expense transactions. Selected transactions from both schedules can be vouched to vendor invoices, work orders, or other supporting evidence to determine their proper classification.
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