I have a few auditing / intermediate financial accounting questions I can't seem to figure out.
I am currently working on an auditing assignment which deals with depreciation of property, plant, and equipment. There are 5 main PP&E accounts (for example, Buildings), each containing individual PP&E assets. The information I have (per company books) and (per auditors) include cost, 2012 Accumulated depreciation, 2013 Depreciation expense, 2013 Accumulated depreciation, 2014 Depreciation expense, and 2014 Accumulated Depreciation. Of course, some of the accounts (per company books) and (per auditors) don't agree in amount. I have determined the required adjustments for the difference between the company books and the auditor's assertions. I need to journalize the impact of the adjusting entries on the client's income before taxes for 2014. The requirement indicates a separate entry for each asset class (for example, Buildings). I have been searching for information on how to perform these entries to avail. I have an idea of the correct entries, but I am not sure. My idea is to debit Retained Earnings and credit depreciation expense (or vice versa, depending on the nature of the adjustment). Am I correct in this application?
Also, I need to perform prior period adjusting entries. I have a question concerning the time periods included in the prior period adjustments: would 2014 be included? The reason I ask this question is because from what I understand, until the audit of the current year's financial statements are completed, the financial statements are not published. Therefore, if I am conducting an audit for the 2014 financial statements, and they contain errors, I wouldn't perform any prior period adjustments pertaining to these errors since the financial statements (as I assume) haven't been published yet.
Thanks.
I am currently working on an auditing assignment which deals with depreciation of property, plant, and equipment. There are 5 main PP&E accounts (for example, Buildings), each containing individual PP&E assets. The information I have (per company books) and (per auditors) include cost, 2012 Accumulated depreciation, 2013 Depreciation expense, 2013 Accumulated depreciation, 2014 Depreciation expense, and 2014 Accumulated Depreciation. Of course, some of the accounts (per company books) and (per auditors) don't agree in amount. I have determined the required adjustments for the difference between the company books and the auditor's assertions. I need to journalize the impact of the adjusting entries on the client's income before taxes for 2014. The requirement indicates a separate entry for each asset class (for example, Buildings). I have been searching for information on how to perform these entries to avail. I have an idea of the correct entries, but I am not sure. My idea is to debit Retained Earnings and credit depreciation expense (or vice versa, depending on the nature of the adjustment). Am I correct in this application?
Also, I need to perform prior period adjusting entries. I have a question concerning the time periods included in the prior period adjustments: would 2014 be included? The reason I ask this question is because from what I understand, until the audit of the current year's financial statements are completed, the financial statements are not published. Therefore, if I am conducting an audit for the 2014 financial statements, and they contain errors, I wouldn't perform any prior period adjustments pertaining to these errors since the financial statements (as I assume) haven't been published yet.
Thanks.