Pineapple Beach Hotel Co (Pineapple) operates a hotel providing accommodation, leisure facilities and restaurants. Its year end was 30 April 2012. You are the audit senior of Berry & Co and are currently preparing the audit programmes for the year end audit of Pineapple. You are reviewing the notes of last week’s meeting between the audit manager and finance director where two material issues were discussed.

Depreciation

Pineapple incurred significant capital expenditure during the year on updating the leisure facilities for the hotel. The finance director has proposed that the new leisure equipment should be depreciated over 10 years using the straight-line method.

Required:

Describe substantive procedures to obtain sufficient and appropriate audit evidence in relation to the above two issues.

Note: The total marks will be split equally between each issue. (8 marks)