Fixed Assets Audit

Fixed Assets Audit

An audit involving counting of all fixed assets together with their monetary value evaluation is called a Fixed Asset Audit. It deals with building, maintaining and updating records of purchase such as date of purchase, receipts, serial no. of equipment, depreciating value and other relevant details.

What are fixed assets?

Fixed Assets are defined as the assets held to be used to produce or providing goods or services and are not held for sale in the ordinary course of business which is expected to be held in use for more than one accounting period

  • Some of the examples are: Buildings & Furniture, Machinery & Equipment, Computer, and Vehicles.

In simple words, physical verification of above is called Fixed Assets Audit. We at MAG provide best Fixed assets auditing solutions in Delhi and across India. If you are looking for the service of Fixed Assets Audit in Delhi, you can feel free to approach us.

Audit Objective:

  • To ensure proper records relating to fixed assets are being maintained.
  • To ensure that only capital expenses are being capitalised.
  • To validate the correctness, accuracy and completeness of depreciation calculated and compliance of Schedule II of Companies Act, 2013.
  • Compliance of relevant IND AS applicable and of disclosure requirements as per Schedule III of Companies Act,2013

Documents required from the client:

  • Details of internal policies and guidelines regarding fixed assets and their depreciation.
  • Fixed asset register maintained by the client and the features of fixed assets’s budget.
  • Copies of supporting documents/ vouchers like purchase requisitions request for quotations, quotations, comparative statements, POs, invoices etc. for the samples selected.
  • Obtain the list of authorised people who can approve the purchase/disposal of fixed assets at different stages of the purchase or disposal processes.
  • Physical verification register of the fixed assets maintained by the client.

Process of Verification:

  • Examine the internal policies of the client and analyse whether they are in line with the statutory requirements or not.
  • Verify whether the opening balances being reflected in Financials and FAR are same as the closing balances as per last year audited Financials.
  • Verify the FAR for its completeness, correctness and accuracy and its compliance in accordance with the Companies Act, 2013. (CARO 2016 requirements)
  • In case the assets are revalued, ensure that the entire class of such fixed assets are revalued.
  • Ensure revaluation increase/decrease is adjusted against the Revaluation Reserve/Profit & Loss Account.
  • Conduct the physical verification of fixed assets to ensure the following:
    • The physical existence of the asset.
    • Fixed assets are appropriately labelled with the respective asset number for identification.
    • Ensure that assets are in working condition.
    • Details regarding the number of fixed Assets are adequately captured in FAR.
    • There prevail proper controls to restrict unauthorised access to fixed assets. 
    • Physical verification of fixed assets is done at regular intervals by the management.
    • Ensure relevant fixed assets auditing procedures 

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A: A fixed assets audit is important to ensure the accuracy of a company's financial statements, prevent fraud and theft, and make sure that assets are being used efficiently and effectively.

A: The steps involved in a fixed assets audit typically include planning, identifying and listing assets, physical verification, valuation, reconciliation, and reporting.

A: A fixed assets audit is usually conducted by an internal auditor, an external auditor, or a team of auditors who specialize in fixed assets.

A: Some common challenges that arise during a fixed assets audit include inaccurate or incomplete records, difficulty in locating assets, lack of cooperation from staff, and valuation issues.

A: A company can prepare for a fixed assets audit by ensuring that all asset records are up to date, organizing asset information and documentation, conducting a preliminary physical inventory, and addressing any identified issues or discrepancies.

A: The frequency of a fixed assets audit depends on the size of the company, the complexity of its assets, and the risk of fraud or error. Typically, a fixed assets audit is conducted annually or biennially.

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