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Auditing Fixed Assets and Capital Work in Progress

Auditing Fixed Assets and Capital Work in Progress

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Published by MM_AKSI
How to audit Fixed Assets and CWIP
How to audit Fixed Assets and CWIP

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Categories:Types, Business/Law
Published by: MM_AKSI on Jun 20, 2011
Copyright:Attribution Non-commercial

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11/29/2012

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Guidance Note on Audit ofProperty, Plant and Equipment
Contents
Paragraph(s)Introduction............................................................................. 6-9Risks associated with Property, Plant and Equipment.... 10-13
InherentRisks....................................................................10FraudRisksandErrors.................................................11-13
Internal Controls...................................................................... 14Substantive Procedures..................................................... 15-41
Verification of Records...................................................18-36OpeningBalances................................................18-19CapitalWork inProgress......................................20-22Additions toPPE...................................................23-28Ownership ofPPE................................................29-30Impairment ofPPE.....................................................31Deletions fromPPE..............................................32-36Physical Verification.......................................................37-41
Recognition......................................................................... 42-45Valuation ............................................................................. 46-73
CarryingCost ofPPE.....................................................46-57PPE Acquired on/or asGovernmentGrants...................58-60Depreciation..................................................................61-64UsefulLife ofPPE...............................................................65Impairment ofPPE.........................................................66-69Revaluation ofPPE........................................................70-73
Disclosure................................................................................ 74Audit in IT Environment...................................................... 75-77
 
The following is the text of the Guidance Note on Audit of Property, Plant andEquipment (PPE)issued by theAuditing and Assurance Standards Board (AASB)of the Institute of Chartered Accountants of India. This Guidance Note should be read in conjunction with the "PrefacetotheStandards oQuality Control, Auditing, Review, Other Assurance and Related Servicesissued by the Institute.
1.Paragraph26 of the "PrefacetotheStandards on QualityControl, Auditing, Review, Other Assurance and RelatedServices”states that “Guidance Notes are issued to assistprofessional accountants in implementing the EngagementStandards and the Standards on Quality Control issued by theAASB under the authority of the Council. Guidance Notes arealso issued to provide guidance on other generic or industryspecific audit issues, not necessarily arising out of a Standard.Professional accountants should be aware of and considerGuidance Notes applicable to the engagement. A professionalaccountant who does not consider and apply the guidanceincludedin a relevant Guidance Note should be prepared to justify the appropriateness and completeness of the alternateprocedures adopted by him to deal with the objectives andbasic principles set out in the Guidance Note."2.This Guidance Note, does not supersede the Institute'spublications which provide guidance on audit ofProperty, Plantand Equipment (PPE)with special reference to certainstatutoryrequirements, e.g.,the guidance contained inthe Statement ontheCompanies (Auditor's Report) Order,2003.3.The GuidanceNote has been prepared considering therelevantRevised Accounting Standard 16,“Property, Plant &Equipment” (corresponding to IAS 16) which is being issued bythe Institute pursuant to the decision to converge withtheInternational Financial Reporting Standards (IFRS) in respect ofaccounting periods commencing on or after April 1, 2011 andthe existing Accounting standards, AS 10 “Accounting for Fixedassets” and AS 6 “Depreciation Accounting” whichareapplicable to theentities whoarenotrequired tocomply with

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