Question

Discuss the audit procedure followed in verifying management assertion to occurrence, measurement , Disclose, and existence of fixed asset

Answer 1

Answer:

Tailor the correct audit procedures to the testing of fixed assets is not only helps auditors to minimize the detection risks but also helps the auditor to works more efficiently. That means the auditor could spend less time and effort on reviewing the fixed assets but still get the required result.

The auditor could tailor the right auditor procedure only if the controls related to fixed assets are obtained and the risks are properly assessed.

Now, before we go to the detail on audit procedures of fixed assets, it is good to start with the overview of fixed assets including the relevance standard with deal with, the control, assertion, and the risks that might be happened to fixed assets.

Fixed assets are the long term assets that record in the balance sheet and showing balance at the end of the reporting date. Fixed assets are non-current assets that have a useful life for more than one year.

Fixed assets are not recognized as expenses in the income statement at the time of purchasing but it is recognized as expenses when the entity uses them.

Fixed assets are normally large if we compare to other assets like current assets. And they are generally considered as sensitive areas from the audit perspective.

The auditor in charge of these areas should be the one that has experiences and knowledge enough otherwise the detection or audit risks might be increasing.

Understanding Control:

Auditors should obtain the key control on how the entity manages and control its fixed assets. The better auditors understand internal control over fixed assets, the better the auditor tailors the procedures and implement the procedures.

There are many key areas that they should consider reviewing. Those including CAPEX budget preparation, and authorization.