You are on page 1of 12

FIXED ASSET AUDIT CHECKLIST

Comments arising out of the audit of Fixed Assets are as below:


"S.No.". <<Place your Comments on observations / discrepencies here >>

CHECK INTERNAL CONTROL MEASURES


Ensure the Following:
1 All tangible and intangible fixed assets are adequately safeguarded
2 All documents of title should be held in a secure place with adequate control
over removal and replacement.
3 Written authority should be obtained for;
a) Declaration regarding fixed asset scrapped.
b) Selling a fixed asset
4 A report must be prepared and issued in respect of capital assets
sold/scrapped or transferred.
5 Regular review of adequate security arrangements
6 There should be a periodic inspection of assets.
7 Regular review of insurance cover requirements over fixed assets.
8 All movements in fixed assets are accurately recorded.
9 Register of fixed assets should be maintained and reconciled to physical
inspection of fixed asset and to nominal ledger.
10 Separate register should be maintained for hired assets, leased asset and
jointly owned assets.
11 Additions to fixed assets register must be verified and checked by authorised
12 person.
Obtain written authorisation for scrapping/disposal or sale of fixed assets.
13 Special care should be taken if assets are sold or disposed off to directors, staff
or other related parties.
14 Continuity checks should be maintained over fixed asset disposal and
15 additions.
All additions and disposal are correctly recorded.
16 Full procedure should be prescribed for the purchase of new fixed assets,
including written authority, work order, voucher and other relevant evidence.
17 Documents of disposal should be checked by independent person.
18 Check calculation of profit/loss on disposal.
19 Company should maintain a list of title for all landed properties and buildings.
20 Separately record should be maintained for the plant, machinery, etc. used by
the company but owned by the others.

21 Check that all obsolete and damaged items are struck off from the records and
financial accounts.
22 Assets are properly insured.
23 Ensure that following risks like flood, fire, earthquake, and riot are covered by
appropriate insurance policies in respect of plant and machinery,building, etc.
24 If insurance cover is not provided, check that other measures are taken by the
management.
25 New assets acquired during the year should also be covered by policies.
26 Check the basis adopted for the insurance.
27 Proper arrangement should be made for reviewing the adequacy of insurance
coverage.
28 All assets are correctly depreciated and recorded at written down value.
29 Inspect physically and note conditions and use of asset.
30 Controls to prevent over depreciation of fully depreciated assets.
31 Review the rate applied on different categories other assets as per prescribed
32 rule.
Regular review of usage or wear and tear and its effect on asset life.
33 Incase of capital expenditure, check authorisation limit.
34 Separate control account should be maintained for fixed assets under
35 construction.
All expenses on wages, material and stores which are capital in nature must
be charged to capital asset account.
36 Records of such fixed assets should be regular written up throughout the year.
37 Accounting Standards, AS-6 on depreciation must be followed and it should be
ensured that disclosure are in accordance with AS.
FIX THE OBJECTIVES OF AUDIT
Internal Audit of Tangible and Intangible fixed assets involve the following objectives:
A) All existing assets, which are used in the companys activities and have
ownership title, are accounted for.
B) Tangible and Intangible fixed assets are valued on appropriate value consistent
with previous year.
C) Charge for yearly depreciation and balance of accumulated depreciation are
reasonable having regard to expected useful life and residual value.
D) Tangible and intangible fixed assets are presented in accounts in compliance
with Companies Act and Accounting Standards.
E) The Companys authorised capital expenditures are correctly taken into
account.
VERIFY THE EXISTENCE/ACCOUNTING OF ALL ASSETS
1 Ensure that all existing assets, which are used in the companys activities and
have ownership title, are accounted for.
2 Ensure that proper records of fixed assets including fully depreciated assets
are maintained.
3 Check that expenditure such as repairs, renewals maintenance do not include
any material expenditure on asset.

4 Check rental and hire expenditure accounts for ensuring that finance lease
have been capitalised.
5 Ensure that all new additions during the year are included and assets sold or
discarded off are excluded.
6 Reconciliation of Fixed asset register to physical inspection of fixed assets and
to nominal ledger.
VERIFY LAND AND BUILDING
1 Verify properties and relate them to the plan contained in the title deeds.
2 Check acquisition and disposal of land and building with minute books and
other available evidence. Any change must be scrutinized.
3 All decisions regarding acquisition or disposal of any asset recorded in Board
minutes must be recorded in accounting records.
4 In case of leasehold land, auditor should see the certificate of registration of
5 title.
Verify the cost with reference to documents and ensure that lease should be
written off over the year as the value diminishes.
6 Building may be purchased or constructed. If constructed, auditor should see
that all expenses on wages, material, etc., are debited to Building account.
7 Examine bill of contractors and architects to verify the value.
8 If building is purchased, auditor should vouch the payments and ensure that
conveyance deed is registered and such registration charges, legal charges,
etc., are also debited to the building account.
VERIFY OTHER ASSETS
1 Inspect physically all recorded items of plant and equipment, fittings, tools and
equipments and motor vehicle, etc., and reconcile them with nominalledger.
2 Acquisition of new fixed assets and improvements to the existing ones should
be verified from supporting documents, e.g., orders, invoices,receivingreport
and title deeds, etc.
3 Self-constructed fixed assets and capital work-in-progress should be verified
with the contractors bills. Work-order records and independent confirmation of
the work performed.
4 Incase of fixed assets destroyed, scrapped or sold, ensure that
a) retirements have been properly adjusted
b) On sale of assets, any resulting profit or losses have been properly
adjusted and disclosed in profit and loss account.
5 Scrutinise any assets destroyed, scrapped or sold during the year but not
6 recorded.
Examination of major additions to ascertain whether they represent additional
capacity or replacement of old asset.
7 If necessary obtain a certificate from executive that all assets destroyed or
sold have been recorded in the books.
8 Ensure that the method of verification was reasonable in the circumstances
relating to each asset.

9 Test check the books recorded of fixed assets with the physical verification
reports.
VERIFY INTANGIBLE ASSETS
1 These assets have no physical existence such as goodwill, patents,
trademarks, copyrights, tenancy rights, etc.
2 Verify documentary evidence such as patent, licensing agreements, written
assignment.
3 Check certificate of registration and renewal for patent and trademarks.
4 Examine that conditions imposed by agreements have been complied with.
5 Check that goodwill should be written off out of annual current profits within a
reasonable period.
6 Value of the copyright should be examined every year. Ensure that assets
should be disclosed at cost less amount written off from time to time.
7 In case of trademarks and patent rights ensure that all expenses of creation,
generation and registration of right should be capitalised.
8 Verify the existence of purchased goodwill with purchase agreements.
9 Review minutes of board for evidence of additions and disposals.
10 Check the accounting policies adopted for intangible assets and note down the
details in the permanent file.
11 Ensure that amortization policy and the amounts at which assets are recorded
are correct and adequate.
12 In case of construction of new project, review the management plans and
marketing forecasts to ascertain whether necessary finance will be available or
13 not.
Check past periods records for assessing accuracy of previous forecasting.
14 Review the circumstances of factors affecting the value of intangibles such as
change in market place, operation of law, licensing agreements, etc.
VERIFY VALUATION/DISCLOSURE REQUIREMENTS
1 Ensure that tangible and intangible fixed assets are valued at appropriate
value consistent with the previous year.
2 Ensure that fixed assets have been valued and disclosed in the financial
statements according to generally accepted bases of accounting andprevailing
3 practices.
Ensure that additions made during the year are sanctioned from minutes and
capital expenditure budget.
4 Check that assets on which subsidy is granted are properly accounted for and
discarded separately.
5 Check the proceeds of disposal of assets with cash book and sales invoices.
6 Check additions from and disposal to directors and related parties and specific
disclosure should be made of that fact.
7 If any asset is owned jointly with others, examine the relevant documents such
as title deeds, agreements, etc., to ascertain firms shareof such assets.

8 If expenditure is capitalised, verify that the basis is reasonable and consistent


by checking the following:
a) Whether deferred development expenditure relate to specific projects.
b) Whether the policy followed is adequate in terms of the recoverability of
expenditure.
c) Interest should be capitalised only if specific to a project.
9 Auditor should check that in case of revaluation of fixed assets, appraisal is
made by in-dependent and qualified person and should be based on adequate
and reasonable basis.
10 Check that information supplied to valuer is correct and reasonable.
11 Check that the basis adopted and the assumptions made are consistent with
those used in the previous years.
12 Ensure that the amount of the valuation is correctly recorded in the accounts
and revaluation surpluses are properly accounted for.
13 Tangible and intangible fixed assets are presented in accounts in compliance
with Companies Act and Accounting Standards.
14 Guidance Note on Audit of Fixed Assets issued by the ICAI lay down the
guidelines. Refer the same.
15 AS-10 on Fixed Assets calls for the following disclosure requirements:
a) Gross and net book value of fixed assets at the beginning and end of an
accounting period showing additions, disposal, acquisition, and other
movements;
b) Expenditure incurred on account of fixed assets in the course of
construction or acquisition; and
c) Revalued amount substituted for historical costs of fixed assets, the
method adopted to compute the revalued amounts, the nature of indices use,
the year of any appraisal made, and whether an external valuer was involved,
in case where fixed assets are stated at revalued amounts.
DEPRECIATION
1 Ensure that charge for yearly depreciation and balance of accumulated
depreciation are reasonable having regard to expected useful life and
2 residualvalue.
Ensure that depreciation charge for the year is reasonable in relation to the
accepted policies of the previous years and book value of the fixed assets.
3 Review the levels of profits and losses on disposal and assess the adequacy of
depreciation rates.
4 Prepare a statement of the depreciation for the year for all assets.
5 Ensure that the depreciation policies adopted are reasonable and consistent.
6 Verify whether there are fully depreciated assets still in working account.
7 Note the technological changes and replacement policy of the company,
history of profits/losses on disposal of any asset.
8 Check calculation of rate applied.
9 Consider of a special depreciation rate for assets used on loss making products
no longer in use due to abnormal use, obsolescence, physical deterioration.

10 Incase lease premiums are capitalised, check whether part of the premium be
written off over the period.

Include in
REPORT 1

REPORT 2

REPORT 3

ASSERTIONS
COMPLETENESS
EXISTENCE
ACCURACY
VALUATION
DISCLOSURE

E
E

C
C
C
C

E
E
E
E
E

A
A
A

V
V
V

C
C
C

E
E

V
V
V

C
C
C

E
E
E

A
A
A

V
V
V

V
C
C

E
E

C
C

E
E

A
A

V
V

A
A
A
A
A
A

V
V
V
V
V
V

C
C
C

V
V

D
D

wing objectives:
A

V
D

D
A

C
C

E
E

A
A

V
V

A
A

V
V

D
D

C
C

E
E

C
C

E
E
D

V
v

C
C

A
A

V
V

A
A

V
V

D
E
A

A
A

V
V