C – IMOBILIZARI NECORPORALE SI CORPORALE / Fixed assets intangibles & tangibles

Done/ No/

paper ref.
Not appl.
Working
Task description

1. Evaluate the accounting policy for fixed assets (V)

Perform the following with regard to the fixed assets accounting policy:
- obtain or update understanding of the company’s accounting policy for fixed assets, including depreciable lives,
capitalization policy, and method of depreciation;
- evaluate the reasonableness of the policy considering the industry, history of fixed assets additions, etc.;
- verify that the policy is in compliance with applicable regulations (reporting standards) and is consistent with prior years;
- through performance of audit work in this area ensure the company is in compliance with the accounting policy.
2. Obtain fixed assets analysis and reconcile totals (A)
Obtain an analysis of the fixed assets account balances, including balances at the beginning of the period, additions,
disposals, transfers, depreciations, and balances at the end of the period and (a) trace account balances to the general ledger
and to the prior year working papers; (b) test the mathematical accuracy of the analysis and (c) review the summary for
possible omissions. Note: this step can be incorporated in the following step (no. 3).
3. Agree the detailed listing of fixed assets to the analysis (A)
Obtain a detailed listing of fixed assets and (a) trace totals to the analysis of fixed assets; (b) trace reconciling items
(differences) to supporting documentation; (c) examine support for any significant adjustments made during the year in
reconciling the detailed fixed assets records with the accounts in the general ledger; (d) test the mathematical accuracy of the
detailed listing; (e) scan the detailed listing of fixed assets to identify and then investigate items which may be repairs and
maintenance expenses and assets which may no longer be in use, etc.
4. Perform substantive analytical procedures (C, A, E, CO, V)
Perform, to an extent to achieve the desired degree of assurance (depending on the natural limitations of analytical
procedures and the rigor with which we apply the test), substantive analytical procedures: (a) develop an expectation, based
on appropriate data (assess the reliability of data, considering the extent of comfort from controls); (b) determine the variation
amount or % (threshold) to be used in the investigation of differences from expectations; (c) compute the differences between
recorded amounts and the expectations; and (d) investigate variations from expectations by seeking relevant explanations
from management or appropriate corroborating evidence.
Examples of analytical procedures: performing a fluctuation analysis by subsidiary, product line, division, etc.; relate significant
changes in fixed assets with capital budgeted amounts; consider whether changes are also reflected in related account
balances (real estate taxes, utility usage, production levels, etc.); analyze trends in repairs and maintenance accounts;
correlate the evolution of repairs and maintenance expenses, additions and the average age of fixed assets to identify any
inconsistent or illogical condition (e.g. decreasing repair and maintenance expense, increasing additions and increasing
average age of fixed assets).
5. Review repairs and maintenance accounts (C)
Review fluctuations in the repairs and maintenance accounts and, where appropriate, examine supporting documents for
significant charges to the account to determine whether amounts should be capitalized or expensed.
6. Identify whether fully depreciated assets are utilized (PD)
Identify fully depreciated assets and obtain assurance that these assets are still utilized (e.g. physical inspection). Determine
whether adjustments to account balances are necessary (write-off or scrap assets which are fully depreciated and not in use).
Determine whether depreciation rates for similar assets may not be appropriate (if fully depreciated assets are still in use it
might be an indication that the useful life duration used for depreciation was too short).
7. Examine documentation supporting significant additions (A, E, CO)
For significant fixed assets additions: (a) examine supporting documentation (e.g. invoices, purchase agreements, titles,
construction contracts, delivery minutes, commissioning minutes); (b) evaluate whether the addition should be capitalized or
expensed in accordance with accounting principles and the entity’s fixed assets policy for intangibles and tangibles; (c) ensure
the addition was recorded at the appropriate amount; and (d) ensure the additions have been authorized and approved
internally by the client company.
8. Examine documentation supporting significant disposals (A, E, CO)
For significant fixed assets disposals: (a) examine supporting documentation (e.g. sale invoice, sale contract, minutes of
delivery of the asset); (b) test amounts adjusted to the accumulated depreciation accounts; (c) test amounts charged against
or credited to income statement accounts (loss / gain on disposal); (d) verify sales price and examine receipt of amount (if
applicable); (e) ensure the disposals have been authorized and approved internally by the client company.

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A = accuracy / C= completeness / E = existence / V= valuation/ CO = cut off / PD = presentation & disclosure / RO = rights & obligations
 C – IMOBILIZARI NECORPORALE SI CORPORALE / Fixed assets intangibles & tangibles
9. Physically inspect fixed assets (E)
Test, to an extent based on materiality and inherent risk, the existence of fixed assets by: (a) understanding the
client’s procedures for ascertaining the existence of fixed assets; (b) observing the client’s physical count procedures;
and (c) physically inspecting significant fixed assets and ensuring they are still being utilized.
10. Verify ownership of fixed assets and identify any pledges (E, RO, PD)
Verify, to an extent based on materiality and inherent risk, that rights and obligations assumption is achieved for fixed
assets by examining titles, deeds, registration of documents, supporting the ownership of such assets. For
documents held by third parties (banks and other lending institutions) obtain confirmation from the custodian that the
client has valid title to the assets and whether the asset has been pledged as security for liabilities of the client or third
parties. Enquire about any pledges or liens existing on fixed assets.
11. Recompute depreciation expense (A)
(a) evaluate whether the depreciation life is reasonable, (b) recomputed depreciation expense either for all fixed
assets or by classifying fixed assets in major categories and making approximations or by recomputing and testing
depreciation for individual assets (a selection) and (c) review results and investigate significant differences.
12. Consider the carrying value of fixed assets (V)
Consider whether adjustments should be made to reflect the inability to recover the carrying value of assets due to
replacement, changes in client business, property held for sale, valuations performed, etc. Propose adjustments as
appropriate.
13. Review valuations performed for fixed assets (V)
For fixed assets valuations obtain and review the valuation reports. For both third party valuations and internally
developed valuations obtain an understanding of the method used and document this information and assess its
reasonableness. Verify if asset recording is appropriate, including any additional depreciation or valuation reserve.
Consider the need for use of specialists to determine the market value of certain specialized fixed assets.
14. Leases (A, RO, PD)
Obtain a list of leased assets. Determine if the lease is operational or financial. For the assets under lease, obtain
confirmation from the lessor that the lease is currently fulfilled by the lessee. Check against the leasing contracts that
the gross book value is properly accounted for.
15. For intangibles, very fee payments to agencies (A, E)
Verify, to an extent based on materiality and inherent risk, that payments made for licensing fees, registration fees,
patent fees, etc. are in accordance with agency requirements.

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A = accuracy / C= completeness / E = existence / V= valuation/ CO = cut off / PD = presentation & disclosure / RO = rights & obligations