Regarding the verification of fixed assets with significant additions, the auditor may adopt the following procedures:
1. Physical Inspection: The auditor can physically inspect the fixed assets to verify their existence, condition, and location. This may involve conducting site visits, examining asset tags or labels, and comparing the physical assets to the fixed asset register.
2. Documentation Review: The auditor can review supporting documents such as purchase invoices, contracts, agreements, and capital expenditure requests to validate the additions to the fixed assets. They may also review the capitalization policy and ensure compliance with applicable accounting standards.
3. Reconciliation and Substantive Testing: The auditor can reconcile the fixed asset register to the general ledger and perform substantive testing procedures to ensure the accuracy and completeness of the recorded fixed asset balances. This may involve vouching purchase invoices, examining lease agreements, and performing calculations for depreciation and impairment.
4. Evaluation of Internal Controls: The auditor can assess the company’s internal controls over fixed asset acquisitions, disposals, and record-keeping. This evaluation helps determine the reliability of the fixed asset data and the effectiveness of internal control processes.
By applying these procedures, the auditor can obtain sufficient and appropriate audit evidence to support their conclusions about the accuracy, completeness, and valuation of the validity and existence of fixed assets with significant additions.
