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How and why ppe would be at risk of misstatement

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Reference no: EM132759627

You are an auditor of Blue Jay Limited (BJL). BJL provides equipment to the construction industry. In relation to the property, plant and equipment (PPE) account, the following is an extract of its unaudited 2020 financial report:

                         30 June 2020 (unaudited) $000                     30 June 2019 (audited) $000
PPE (at cost)                     196,250                                                177,650

You were appointed in November 2019. You are aware that there were major repairs conducted during the period commencing 27 April 2020, with an expected completion date of 30 July 2020. Discussions between you and management of BJL indicate that there is a risk that BJL will capitalise all repair costs to minimise the impact on expenses.

Required:

Problem 1: How and why PPE would be at risk of misstatement if there are no good controls over the treatment of repair costs? Explain.

Reference no: EM132759627

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