How do you test depreciation?
A core Audit & Assurance interview question — asked in analyst and associate interviews across IB, PE, and the Big 4.
THE SHORT ANSWER
Substantive: (1) Verify that the depreciation policy is consistent with the applicable framework (IAS 16). (2) Recalculate depreciation for a sample of assets: cost, useful life, residual value, method. (3) Test additions and disposals. (4) Assess whether useful lives and residual values are still appropriate. (5) Check for impairment indicators (IAS 36).
WHAT INTERVIEWERS LISTEN FOR
- ✓Verify depreciation policy consistency
- ✓Recalculate depreciation for sample assets
- ✓Test additions and disposals
- ✓Assess useful lives and residual values
- ✓Check for impairment indicators
COMMON MISTAKES
- ✗Only recalculates without testing policy
- ✗Ignores impairment testing
- ✗Assumes useful lives never change
Reading isn't the same as answering under pressure.
Interviewers don't hand you the model answer — you deliver yours on a clock. Practice this and 1,000+ questions with AI feedback on every answer.
RELATED QUESTIONS