Fixed Assets Audit and Certification

Fixed Assets Audit and Certification

The term audit usually refers to a financial statement audit. A financial audit is an objective examination and evaluation of the financial statements of an organization or externally by an outside Certified Public Accountant (CPA) firm.

Fixed asset audit identifies the assets that the company and current status of the assets. Because fixed asset audit helps to prepare the accurate balance sheet. Hence it will ensure the regulatory compliance. In addition to these fixed asset audits provides better internal control.

Fixed assets reduce their value over time. Hence depreciation of fixed assets is used to allocate cost over their useful life. Every fixed asset has its own depreciation values apart from the land.

Steps to achieve the Objectives

• Step 1: Understand the client procedure of Fixed Assets acquisition and disposal

  In this step, we ask client for Policy and SOPs regarding Fixed Assets. Form this we obtain the general understanding of Client Working Pattern on Fixed Assets and we came to know who is responsible for what.

  On the basis of same we can plan our audit program on Fixed Assets.

• Step 2: Obtain Fixed Assets Register as maintained by the Client

  To ensure this we have to obtain Fixed Assets Register maintained by the Client. Further we have ensure that the Fixed Assets Register contained following things -

  a. Year of acquisition;

  b. Sufficient description of the assets to make identification possible;

  c. Classification, that is, the head under which it is shown in accounts e.g., Land, Building, Plant & Machinery etc;

  d. Location;

  e. Quantity, i.e. no. of units;

  f. Depreciation Written off to date;

  g. Adjustment for revaluation or for increase or decrease in cost consequent on revolution of Foreign Currency Liabilities if any;

  h. Particulars regarding sale, discarding, demolition, destruction etc;

  i. Particulars of Fixed Assets that have been retired from active use and held for disposal;

  j. Land freehold - Land leasehold, Building, Land, Plant & Machinery, Vehicles, Furniture & Fixtures, Office Equipments etc.

• Step 3: Vouching of Additions to Fixed Assets

  a. Decision on Sample

  b. Checking of Bills

  c. Assets on Lease

  d. Imported Assets

  e. Other aspects for checking

• Step 4: Depreciation and Amortization

  Obtained total number of shift worked during the period under review from plant head.

  Ensure that depreciation/Amortization is calculated as per Accounting Policy, No. of Shift Working and Schedule XIV, AS-26.

  Depreciation on assets purchased during the year should be charge on pro-data basis.

• Step 5: Revaluation

  Identify the basis of revaluation. Fact of revaluation should be disclosed for subsequent five years.

  Depreciation on revalued amount should be transfer to Revaluation Reserve. If the revalued assets sold, the remaining balance of Revaluation Reserve should be transfer to Revenue Account.