Analysis: Accsys Technologies PLC - Case Study Example

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This paper gives details that for a manufacturing firm, ‘property, plant and equipment’ (PPE) is a significant item in the total assets, hence its misrepresentation can cause a significant financial impact. For example, on 31 March 2014, the value of property, plant, and equipment was €4,056,000…
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Analysis: Accsys Technologies PLC
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Download file to see previous pages In addition, the turnover for PPE is much lower than current assets (such as stock which is held for sale), hence its audit is of significance. In considering inherent risk in relation to PPE, the auditor must carefully review all capital budgets and commitments, especially in an attempt to unravel incidences of fraud.
During the year 2012, the group entered a sale and leaseback agreement for land worth 1.7milllion (Accsys Technologies PLC, 2014, p. 15). This disclosure needs a closer investigation into the authenticity of the transactions, the accuracy of the valuations, authorization compliance among other control measures. This is because a transaction involving such a huge value could be a ground for material concealment and fraud. It also appears that in July 2013, TTL granted Medite rights to build and operate a plant. However, it is farther disclosed that the license agreement was conditional upon the approval of Mediates B.O.D, which presents this as an area of high audit risk because of the uncertainty that surrounds the agreement. Furthermore, an unforeseen outcome could lead to material financial loss or gain. Bearing in mind that the value of PPE is significant, it would be prudent for the entity to make adequate arrangements to ensure that such assets are sufficiently safeguarded, for example through insurance of assets and warranties, but unfortunately, we do not observe any evidence of such safeguard measures (Hirst and Koonce, 1996). This puts the company at a very high risk of losing the property of significant values with no possibility of recovery. In the financial director's financial review, it is indicated that the company incurred a finance expense of € 226,000 in 2013. The auditor must, therefore, make appropriate inquiry to find out if such purchase agreements, that pertains PPE, have been properly capitalized. ...Download file to see next pagesRead More
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