Reference no: EM132524044

Question - The audit senior has asked you to perform analytical procedures to obtain substantive evidence on the reasonableness of recorded depreciation expense of the delivery equipment of a client. Changes in the account occurred pretty much evenly during the year. The estimated useful life is six years. Estimated salvage value is 10% of original cost. Straight-line depreciation is used. Additional information includes:

Delivery Equipment (per General Ledger)

Beginning Balance $380,500

Additions 154,000

Disposals (95,600)

Ending Balance $438,900 Current year depreciation expense per books = $60,500.

Based on this information, develop an expectation of the amount of depreciation expense for the year as part of a reasonableness test. Does the recorded depreciation expense seem acceptable? Explain. What is the impact of the result of this analytical procedure on other substantive procedures that the auditor may perform?