AUDIT PROGRAM

FIXED ASSETS &

INTANGIBLES

GROUP
Client: GROUP

Period: Year ended 30 June 2014

Significant Account(s) / Disclosure(s)

Select significant account(s) / disclosure(s) and relevant assertions for which test of operating
effectiveness of controls is planned.

Amount in Rupees
Significant account(s) / Current period Transaction C E A V O P Estimate / Fraud I.T. IR
disclosure(s) balance with related complex Risk reliance
parties nature
Property and
equipments
Depreciation
Intangible assets
Amortization
CWIP
Leased assets
Surplus on revaluation
Gain / loss on sale of
assets
Assets written off
Mark-up expenses
 Audit Program – Fixed Assets & Intangibles

PROCESS ACTIVITY

Property & equipments and Depreciation expense

Document the key elements of our understanding of the process, including activities in relation to:
- initiation and authorization;
- recording and processing of relevant transaction(s) and relevant I.T. applications, if any; and
- preparation of relevant disclosures.

Initiation and authorization

Recording and processing

Preparation of relevant disclosure

 Audit Program – Fixed Assets & Intangibles

Assessed Risk and Relevant Controls

Risks associated with significant account(s) / disclosure(s)

Risk identified Description of control I.T. Frequency To be tested

Component of control
Stealing of cash Preparation of Y / No Annual / Y/N
received against reconciliation quarterly /
revenue biannual
Periodic reconciliations are prepared on monthly basis by Finance Officer and
the same is reviewed by Finance Manager and approved by CFO.
Fraud risk is presumed Y / No Annual / Y/N
over revenue. Further, quarterly /
there are significant biannual
sales to related parties.

The calculation for Y / No Annual / Y/N

provision for doubtful quarterly /
debts is highly biannual
subjective and based on
judgments.

Absence of proper Y / No Annual / Y/N

documentation / quarterly /
agreements for biannual
computation of
commission on sales.

Y / No Annual / Y/N
An incorrect revenue
quarterly /
figure is posted to the
general ledger. biannual

Y / No Annual / Y/N
An incorrect revenue
quarterly /
figure is posted to the
general ledger. biannual

Y / No Annual / Y/N
Revenue is recognized at
quarterly /
an incorrect price
biannual
 Audit Program – Fixed Assets & Intangibles

Design and implementation of relevant controls

Will a walk-through be performed?

Yes
No

Document the details of walk-through.

Name
Location
Date
 Audit Program – Fixed Assets & Intangibles

AUDIT PROCEDURES

Test of Controls
Testing decision

Have we performed test(s) on evaluation of design and implementation of control and documented the
same?
Yes
No
Not applicable

Have we planned to obtain audit evidence from Test of Controls?

Yes
No

Definition of population and units to be tested

Population comprises the revenue recognized during the year and units are individual revenue entries.

Document the procedures performed to test relevant controls.

S. Procedures Assertion Done by W/P
No. Reference
1 Assess the reasonableness of design of system of CO
internal control by enquiring relevant client personnel
and documenting the same. Perform a walkthrough
test to confirm our understanding and identify the
controls to be tested.

2 Ensure that the management does not override controls C

by enquiring from designated staff person(s).

3 Check on sample of selected transactions covering the C

whole period that all controls are exercised on
transactions related to fixed assets added during the year.
Further, check that the fixed assets added during the year
are properly approved by designated / relevant
authorities and are backed up by supporting documents.

4 Check on sample of selected transactions covering the C

whole period that all controls are exercised on
transactions related to fixed assets disposed off during
the year. Further, check that the fixed assets disposed off
during the year are properly approved by designated /
relevant authorities and are backed up by supporting
documents.

5 For selection of additions to CWIP, C

 Check supporting documents; and

 Audit Program – Fixed Assets & Intangibles

 Check proper authorization and approval.

6 Check that the proper fixed assets register has been C

maintained wherein entries relating to additions and
deletions are promptly made. Further, check that the
fixed assets register is periodically reconciled with the
general ledger and physical verification exercise carried
out by the management.

Document the basis of sample selection

Findings

Results of test(s) of operating effectiveness of control

Effective
Not effective
Undetermined
 Audit Program – Fixed Assets & Intangibles

Substantive Testing
Substantive Analytical Procedure

Perform Substantive Analytical Procedure.

S. Procedures Assertion Done by W/P

No. Reference
1 Compare current year balances with last year balances and CO
ensure that any significant variation(s) should be properly
reasoned.
2 Perform depreciation reconciliation to check the CO
reasonableness of depreciation expense for the year.

Test of Detail

Document the impact of our conclusion of the Test of Control on our Test of Detail.

Document the procedures performed for Test of Detail.

S. Procedures Assertion Done by W/P
No. Reference
1 Obtain schedule of Property & Equipments as at 30 June C
2014 and check casting and computation of the same.

2 Trace opening balance from last year closing balance and C

agree current year closing balance with general ledger.

3 For a sample of fixed assets held by the Company as at the CEA

year end, physically inspect to ensure that:

 Asset is owned and held by the Company;

 Remaining useful life appears to be correct; and
 If any impairment is needed.

4 For a sample of fixed assets added during the year by the

Company, perform the following:

 Check that the same are recognized as per the

criteria laid down in Capitalization policy of the
Company;
 Check that the fixed assets do not include an
amount of a nature of revenue expenditure;
 Check the payments from bank statements;
 In case full payment is not made, check that the
asset is recorded at full cost and the balance has
been recognized as a liability; and
 Audit Program – Fixed Assets & Intangibles

 Check that proper entry has been made in general

ledger.

5 For a sample of fixed assets disposed off during the year by C

the Company, perform the following:

 Check the receipts from bank statements;

 In case full payment is not made, check that the
asset is de-recognized at remaining WDV and the
balance has been recognized as a receivable;
 Calculate gain/loss on disposal; and
 Check that proper entry has been made in general
ledger.

6 To check depreciation expense: V

 Determine the reasonableness of depreciation

method, rates and accounting policy;
 Check the consistency of depreciation rates and
accounting policy with prior year;
 Check depreciation expense calculation for
selected assets;
 Check that the depreciation expense is also
charged on idle properties, if any.
 Assess the reasonableness of allocation of
depreciation expense to manufacturing cost and
admin cost, if any.

7 Check the ownership of assets by inspecting the ownership C

documents, like vehicle registration papers, property
documents, import documents, etc.
8 For additions in leased assets, check the additions from V
lease agreements and ensure that the lease is a finance
lease in substance.
9 Check that the depreciation expense on leased assets is CEA
calculated on the same basis as that of the owned assets.
10 For selection of additions to CWIP; P

 Check that the same are recognized as per the

criteria laid down in Capitalization policy of the
Company;
 Check that the CWIP do not include an amount of a
nature of revenue expenditure;
 Check the payments from bank statements;
 In case full payment is not made, check that the
CWIP is recorded at full cost and the balance has
been recognized as a liability; and
 Check that proper entry has been made in general
ledger.

11 For CWIP transferred during the year;

 Audit Program – Fixed Assets & Intangibles

 Check contractor certificates of completion of

project to determine the stage of completion; and
 Proper approval of the same.

12 For assets revalued during the year, check that:

 The entire class of fixed assets is revalued;

 Calculation of revaluation surplus / deficit has
been based on revaluation reports;
 The valuation has been carried out by renowned
valuers; and
 Depreciation is charged on the revalued amounts
and remaining useful life of the assets so revalued.

13 Ascertain the nature of each significant intangible asset by

enquiring and reviewing information contained in prior
year working paper files.
14 Check that the intangible assets fully comply with the
requirements of IAS 38, i.e.;

 Cost of assets is determinable; and

 Economic benefits are expected in future.

15 For a sample of intagibles added during the year by the

Company, perform the following:

 Check that the same are recognized as per the

criteria laid down in Capitalization policy of the
Company;
 Check that the intangible assets do not include an
amount of a nature of revenue expenditure;
 Check the payments from bank statements;
 In case full payment is not made, check that the
asset is recorded at full cost and the balance has
been recognized as a liability; and
 Check that proper entry has been made in general
ledger.

16 For a sample of intangble assets disposed off during the

year by the Company, perform the following:

 Check the receipts from bank statements;

 In case full payment is not made, check that the
asset is de-recognized at remaining WDV and the
balance has been recognized as a receivable;
 Calculate gain/loss on disposal; and
 Check that proper entry has been made in general
ledger.

17 To check amortization expense:

 Determine the reasonableness of amortization

 Audit Program – Fixed Assets & Intangibles

method, rates and accounting policy;

 Check the consistency of amortization rates and
accounting policy with prior year;
 Check amortization expense calculation for
selected assets; and
 Assess the reasonableness of allocation of
amortization expense to manufacturing cost and
admin cost, if any.

18 For assets stuck-up for a considerable period of time,

enquire management of the reasons for the same.
Determine the need to recognize impairment / provision
of the same.
19 Ensure that none of the asset is impaired or the
recoverable amount of an asset is less than its carrying
amount as at the year end. In case the carrying amount is
more than the recoverable amount, ensure that the
carrying amount is reduced to its recoverable amount as at
the year end and the difference is recognized as an
impairment expense in P&L.
20 Inquire and consider available evidence, if any, to identify
all related parties. Obtain a schedule of related-party
balances and determine that all identified related parties
with balances at year end are included in the schedule.
Trace the amounts in the schedule to the trial balance.
21 Determine that the economic substance of the related-
party balances supports their recording.
22 Evaluate the reasonableness of presentation and/or
footnote disclosures of related-party balances.
23 Consider requesting positive confirmation of material
balances with related parties.
24 Obtain a schedule of Revaluation of fixed assets showing
assets wise detail, cost of the assets, revalued amount,
name of valuer. Enquire management of the reason for
valuation of assets and any significant variance identified
in valuation.
25 Test the summarization and opening and closing balances
of the schedule with prior year balances and general
ledger. Further, obtain copies of valuation reports.
26 Examine the valuer’s report to ensure the correctness of
revalued amount of the fixed assets and ensure
independence of the valuer and check appropriateness of
assumptions used by valuer.
27 Check the increase in value of the assets has been
transferred to separate account called “surplus on
revaluation of fixed assets” in accordance with Section 235
of the Companies Ordinance, 1984.
28 Check incremental depreciation transferred from surplus
to unappropriated profit / accumulated loss.
29 Examine the revaluation policy in respect of property,
plant and equipment and ensure that it is being
consistently applied as per requirements of IAS-16 and
 Audit Program – Fixed Assets & Intangibles

IAS-36.

Document the basis of sample selection

Document the significant findings / issues identified, if any.

Findings

Sufficient appropriate audit evidence obtained that the account is not materially misstated.
Yes
No
Undetermined

Prepared by: Sign Date

Reviewed by: Sign Date

Reviewed by: Sign Date

Approved by: Sign Date