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 vehicles 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:
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Delivery E?llll (pr General ledger)
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Beginning balance
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$380,500
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Additions
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154,000
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Disposals
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(95,600)
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Ending balance
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$438,900
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Current year depreciation expense per books = $60,500.
Based on this information, estimate the amount of depreciation expense for the year using analytical procedures. 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?