ACCA Audit and Assurance (F8) Practice Exam

What should auditors verify during the audit of Non-Current Assets regarding charges?

1. Whether the assets are profitable

2. Evidence of charges and commitments

3. The maintenance practices of the assets

4. The depreciation methods used

The correct answer is: Evidence of charges and commitments

During the audit of Non-Current Assets, it is vital for auditors to verify evidence of charges and commitments. This activity is essential because charges, such as mortgages or liens on the assets, can affect the ownership rights and the realizable value of those assets. By confirming the existence of any charges, auditors can ensure that the financial statements present a true and fair view of the entity's financial position. This verification helps to mitigate the risk of material misstatement due to omitted liabilities or encumbrances that could impact the asset's valuation or restrict its use. Moreover, understanding these charges is critical in assessing the risks related to the non-current assets, which can include determining how these charges might influence the asset's revenue-generating potential or its ability to be sold or used in the business. This step is a fundamental part of the auditors' responsibility to provide assurance to stakeholders about the integrity of the financial statements concerning Non-Current Assets. Other options, while relevant in their own right, do not focus specifically on the aspect of charges and commitments, which is a crucial area of concern when evaluating non-current assets during an audit.