Draft an online audit programme for the fixed assets of a large manufacturing company

Auditing and Assurance Revision Questions and Answers

AUDIT PROGRAMME
AUDIT AREA: – Fixed assets Prepared by:
Client:                       Date:
Period:               Reviewed by:
Date:
a) Tests of control:
Tests of controls

i) Confirm that acquisitions and disposals of fixed assets are properly authorized.
ii) Verify that a fixed assets register is maintained and the balance reconciles to the ledger

Substantive procedures: –

(v) Freehold and leasehold land and buildings:

Examine a sample of title deeds, land registry certificates, conveyance, documentation from solicitors and leases. Pay particular attention to any encumbrances i.e. mortgages or other securities held over assets. (This tests ownership, right and obligations and disclosures).
Inspect directors‘ minute book to ensure all title deeds, conveyances, tenancy agreements and leases are properly authorized (occurrence).
Check a sample of entries in the fixed asset register and trace back to source documentation to ensure assets are properly stated at cost. (valuation).
Review company policies for depreciation (with exception of freehold land) and ensure appropriate in the light of the useful life of the building (commonly over 50 years) and ensure that freehold land is not depreciated (valuation and measurement).
Check a sample of calculations of depreciation and ensure that it is done accurately and in line with company policy (measurement).
Review assets and establish the need for any write down for impairments in value. Discuss with management (valuation).
If freehold or leasehold assets are let to third parties inspect tenancy agreements and perform analytical procedures on rental income (Rights and obligations).

viii) Ensure freehold land and buildings are stated at cost or valuation less accumulated depreciation. If revaluation is performed in one year of audit, give the name and qualification of the valuer and state the basis of valuation (disclosure).
ix) Physically inspect a sample of assets (existence).
x) Ensure that the fixed asset register reconciles to the nominal ledger.

b) Plant, machinery, fixtures and fittings

i) Examine a sample of invoices contracts, finance leases or other evidence of title to assets including vehicle registration documents (ownership).
ii) Review company policies for depreciation and ensure it is appropriate in the light of the useful life of the assets.
iii) Check a sample of calculations of depreciation and ensure that it is done accurately and in line with company policy (measurement)
iv) Review assets and establish the need for any write down for impairments in value. Discuss with directors (valuations).
v) Ensure that VAT is appropriately capitalized where it is not recoverable (valuation).
vi) Physically inspect a sample of assets (existence).



(Visited 27 times, 1 visits today)
Share this on:

Leave a Reply

Your email address will not be published.