Control Objective and Test of Controls of Fixed Asserts

2)Make an assessment of the adequacy of these policies and procedures in addressing the major aspects of control in this area.

• Ensure agreement between the two.

• Determine if the asset purchase requisition was properly approved
• Determine if the purchase requisition was approved in a timely basis per policy
• Was the budget reviewed for compliance?
• Do requisitions for assets indicate whether the item is an addition, replacement or improvement?
• Who makes the above determination?
• Are assets recorded in the fixed assets register as such (i.e. Addition, replacement, improvement)

2) The number should be limited to as few as practicably possible to reduce the opportunities to make unauthorized purchases.

2) Because most capital expenditure is anticipated in advance, comparing budget to actual amounts can help detect misuse of funds.

2) Document the division of duties.

• Check that the delivery note properly date stamped upon receipt.
• Check for evidence that the asset was physically inspected and compared to the delivery note.
• Was the delivery note forwarded to the accounts department on a timely basis?

11) Establish responsibility for keeping log of inventory numbers
12) Establish how inventory numbers are allocated i.e. Manual or electronic.
13) Establish who has responsibility for ensuring that inventory for capital assets is conducted on a timely basis.
14) Establish how often capital assets are inventoried and what are the procedures.

• Test existence by tracing the 5 items from the Register to the floor.

2) Select on the same basis another 5 items from the floor and trace to the Register. (test for completeness)
3) For the assets chosen in number 1 above, establish whether the assets were tagged with a visible asset number.

4) Perform a general review of the Fixed Asset Register.

• Assess completeness with which information regarding the asset is recorded
• What type of documentation exists on capital assets purchases?
• Does each “asset master record” include insurance information, warranty information, maintenance schedules and/or leasing information?

5) What type of preventative maintenance standards/policies exists for all types of capital assets?

• How is maintenance tracked per individual asset?
• Is it tracked?

6) What are the policies for requesting, receiving, tracking and recording a transferred asset?

7) Test the selected capital assets from no 1 above for

• Insurance information
• Warranty information
• Maintenance schedules and/or leasing information

16) Establish whether the company has standards for depreciable lives and salvage values.

17) Review adequacy of processes relating to movement of assets between regions/divisions

2) Make inquiries of management/relevant staff about the policies governing the distinction between expenditures to be capitalized and those to be charged to repairs and maintenance.

3) How are detailed asset records maintained? What system is used? (automated IS or manual)

4) From the sample selected above determine if each assets record includes:

• Inventory/asset number
• Location
• Description of the asset
• Serial number
• Make note of any exceptions to the above.

5) Is the fixed asset register regularly reconciled to the general ledger

• Who is responsible for this procedure
• How often is this procedure performed?

6) What is the policy for fully depreciated property?

• Is it written off or carried in the books until retired from service?

7) How are leased assets accounted for? Do asset records distinguish between leased and owned assets?

8.) Are asset values based on historical cost or revalued amounts?

• If revalued amounts used, are the proper accounting standards followed?

9) Review the policies and procedures relating to movement of assets between regions/divisions/departments

10) Assess and report on adequacy of these procedures as well as the adequacy of reporting of these movements and updating the fixed assets register.

11) Determine from inquiries how often capital asset inventories are taken.

12) Document the process of taking inventory.

13) Obtain records of the latest capital assets inventory and perform the following tests:

• Determine who is responsible for taking inventory
• Check that the physical inventory records for that period agreed to the theoretical inventory records.
• Review the reconciliation above for completeness of information.
• Check that the reconciliation was reviewed and approved by an independent senior of the company.

2) Review the authorization policies for capital asset disposal/ retirements.

3) Review the policies for reporting items that are retired or abandoned. Make a note of how applicable gains/losses are recognized.

4) On a sample basis, select 5 retired capital assets from the fixed assets records and perform the following tests:

• Assess whether the assets retirement was properly approved and whether this was done on a timely basis.
• Establish whether record of the asset retired was properly removed from the general ledger and fixed asset register (if no longer in use)
• Check whether any applicable gains and losses were recognized and reported on a timely basis.

5) Ensure that only a specific employee/employees have access to the asset records for performing the asset retirement function.

2) Sort the spreadsheet by

• All assets with zero book value at beginning of the period
• Depreciation provided for the month.
• Ensure that depreciation provision not overstated by providing depreciation on assets with zero book value.

3) Sort the spreadsheet by:

• All assets with a book value at the beginning of the period
• All assets for which depreciation provision is zero
• Ensure that depreciation provision not understated by not providing depreciation for assets having a book value

• Ensure uniformity between the two.

2) Sort spreadsheet above by:

• Asset type/category
• Depreciation rates used

3) Review Fixed Assets policy documents and notes depreciation rates specified per asset category.

4) On a sample basis, assess whether correct depreciation rates have been used to calculate the depreciation provision.