Audit Field Standards:Audit of Fixed Assets Pertemuan 12
Learning Objectives • Understanding Audit Field Standards of Audit of Fixed Audit • Understanding Internal Control of Fixed Assets • Understanding Audit Objectives of Fixed Assets • Being able to design Audit Procedures of Fixed Assets • Understanding of Documents (evidence) to support the record of Fixed Assets • Audit Evidence of Fixed Assets • Physical Examination Report of Fixed Assets • Some Frauds involving Fixed Assets • Examples of Audit Findings of Fixed Assets
The Internal Control Objectives of Fixed Assets • Fixed Assets purchased is to support the company’s operation • Fixed Assets are purchased with the best price • Fixed Assets are guarded and maintained properly • Depreciation expense is computed and allocated/recorded properly • Fixed assets are valued fairly • Fixed Assets disposed are them not used or not economical to be maintained.
Activities Need to be Examined • Acquiring of Fixed Assets whether purchased or manufactured • Disposal of Fixed Assets (whether sale or trade-in or scraped) • Repair and Maintenance (revenue expenditure vs capital expenditure) • Depreciation and Allocation • Classification and Disclosure
Audit Procedures of Fixed Assets are steps to be done sequentially to achieve the audit objectives of fixed assets.
Audit Objectives of Fixed Assets • Transaction Audit Objectives • Occurrence • Completeness • Accuracy • Cut off • Classification • Balance Audit Objectives • Existence • Completeness • Right and Obligation • Valuation and Allocation
Audit Objectives of Fixed Assets • Disclosure Objectives • Occurrence • Right and Obligation • Completeness • Classification and Understandability • Accuracy and Valuation (Boynton, Modern Auditing 8 edition)
Some of Documents (evidence) to support the record of Fixed Assets • Purchase Requisition • Feasibility Study of Purchasing Fixed Assets • Purchase for Quotation • Bid Evaluation • Purchase Order • Contract/Agreement Document • Progress Report or Receiving Report • Written policies of fixed assets • Ownership titles
Audit Evidence of Fixed Assets • Inquiries of the client • Documentation • Confirmation • Observation • Physical examination • Analytical procedures • Reperformance
Physical Examination Report of Fixed Assets • Getting the list of fixed assets at the date of physical examination • Fixed assets’ ownership certificates • Checking/computing the physics of fixed assets • Preparing Physical Examination Report • Tracing the physical examination results back to the balance sheet date • Making adjustment entry and disclosure necessary
Some Frauds in Fixed Assets • Over or under stating the value of fixed assets • Not disclosing fixed assets placed for collateral • Over or under estimating the economical life of fixed assets • Under or over computing the depreciation • Scrapping productive fixed assets • Capitalizing revenue expenditures • Not capitalizing capital expenditures • Ownership title is not on the name of company’s
Examples of Audit Findings of Fixed Assets Assignment for students: Write an hypothetical audit finding of fixed assets ! • Condition • Criteria • Causes • Effects • Recommendation