In this chapter we presented the appropriate controls for property, plant, and equipment accounts, the auditors' consideration of these controls, and the substantive procedures for property, plant, and equipment. To summarize:

• The financial statement capital "property, plant, and equipment" includes tangible assets with a useful life of more than one year that are used in operations. In the audit of property, plant, and equipment, the auditors' primary objectives are to (a) consider inherent risks, including fraud risks; (b) consider controls over these assets; (c) determine the existence of property, plant, and equipment; (d) establish the propriety of the valuation or allocation methods, including the reasonableness of the depreciation program; (e) establish the completeness of recorded property, plant, and equipment; and ( f ) evaluate the adequacy of presentation and disclosure for property, plant, and equipment.

• Key controls over property, plant, and equipment should include proper authorization of acquisitions, adequate records for the various units of property, periodic physical inspection of property, and the use of serially numbered retirement work orders.

• In the audit of property, plant, and equipment for a continuing client, the emphasis of the testing is on transactions that occurred during the year, as contrasted to an emphasis on ending balances. Depreciation expense is often tested by recomputation or through the use of analytical procedures.

• The auditors' objectives for the audit of natural resources and intangible assets are similar to those for property, plant, and equipment. Often in auditing the depletion of natural resources, the auditors must rely upon specialists to estimate the quantity and quality of the resource. The audit of intangible assets typically involves vouching the cost of the assets and evaluating and testing the allocation methods used by the client.

• A significant risk with respect to property, plant, and equipment and intangible assets is the risk of unrecognized impairment.

Describe the nature of property, plant, and equipment and depreciation.

Identify the auditors' objectives for the audit of property, plant, and equipment.

Explain the fundamental controls over property, plant, and equipment.

Assess the risks of material misstatement (inherent and control risks) of property, plant, and equipment.

Design typical tests of controls used by auditors to support the assessed risks of material misstatement (inherent and control risks) for the financial statement assertions related to property, plant, and equipment.

Explain how the auditors design substantive audit procedures to address the risks of material misstatement of property, plant, and equipment.

Explain the auditors' approach to the audit of depreciation.

Describe how the auditors design audit procedures to audit intangible assets.