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 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