Audit Approach and Procedures
Fixed Assets
In carrying out the audit of fixed assets, the auditor is concerned, primarily, with obtaining evidence about their ownership, existence and valuation. For this purpose, the auditor should review the system of internal controls relating to fixed assets, particularly the following:
Control over expenditures incurred on fixed assets acquired or self constructed;
Accountability and utilisation controls; and
Information controls for ensuring availability of reliable information about fixed assets.
The branch auditor should ascertain whether the accounts in respect of fixed assets are maintained at the branch or centrally. Similarly, the auditor should ascertain the location of documents of title or other documents evidencing ownership of various items of fixed assets. The procedures described in the following paragraphs would be relevant only to the extent the accounts and documents of title, etc., relating to fixed assets are maintained at the branch. Where the acquisition, disposal, etc., of fixed assets take place at branches / other offices, but accounting of fixed assets is done at the head office, the branch auditor should examine whether acquisitions, disposals, etc. effected at the branch during the year have been properly communicated to the head office. In cases where, for any reason acquisition of fixed asset is shown in suspense account then the branch cannot classify the asset in the Balance Sheet under this head unless the asset is put to use or ready for use, as the case may be, and all internal formalities are completed. A long standing suspense entry of this type should be properly dealt with by the auditor and may need to be escalated to the statutory central auditors if the amount involved is material.