fixed asset, record depreciation, test for impairment, and record any gain or loss on sale

of the asset. Each event is listed under a separate header.

Evaluate a Capital Purchase Proposal

supporting documents are attached. If not, discuss the missing information with the
sponsoring manager,managers
by other sponsoring and assistinasother
requested to locate
proposals, thethe
discuss additional information.
issue with the sponsoring
manager and
expenses. request
Obtain revisionsfrom
verification as appropriate.
the industrial engineering staff that claimed changes
to throughput
project can be
will impact achieved.
cash flows. If there are inconsistencies in their statements from what
is
5. Obtain the cost of capitaldiscuss
claimed in the proposal, theCFO,
from the issueand
withuse
theit sponsoring
to verify anymanager.
net present value
calculations used in the proposal.
6. Includeand
sponsor, your own assessment analysis
a before-and-after of the risk
of of
thethe proposal.
proposal. If the results are clear, issue a
recommendation along with the analysis.
budget for the following year, incorporating the timing of cash flows noted in the
proposal, unless senior management directs otherwise.

Record the Acquisition of a Fixed Asset

1.
2. Upon receipt ofexceeds
If the purchase a supplier
theinvoice for acapitalization
corporate fixed asset, match it to thethe
limit, record authorizing
purchase in the
purchase
appropriate order
fixedand receiving
asset account.documentation.
If not, record it in an expense account, asindirected by
3. When recording the purchase in the accounts payable module, include the fixed
the
assetassistant
account controller.
the freight, insurance,
4. Access the fixed asset register and taxes, customs
enter in a new fees,
record and
theinstallation costs
name, serial number,
associated with the asset.
fixed asset tag number, asset class, and location of the asset. Scan the supplier invoice
and link the
5. Verify thatdigital image to themethod
the depreciation record selected
in the fixed asset
by the register.
fixed asset register software is
appropriate, based on the asset class.
6. Copy the supplier invoice and the supporting authorization documents in the fixed
assets storage binder.

Record Depreciation

2. In the fixed asset register software, verify that the asset class is correct. The software
1.
willVerify
assignthe asset class assigned
a depreciation method,tobased
a fixedonasset.
the asset class, as well as the number of
years over which the asset will be depreciated.
4. At the end of the month, the fixed asset register software will print the depreciation
3. If there isfor
calculation a salvage value,
all assets. record
Ensure thatitthe
in the fixed assetisregister
depreciation correctsoftware.
for all assets newly
entered during the past accounting period.
5. Print the depreciation report, and record a journal entry based on its results.
6. Store the depreciation report, along with the journal entry, in the journal entry binder.

Test for Impairment

1. Calculate the net book value (Original cost minus accumulated depreciation) of all
assets onfor
2. Select theimpairment
fixed assetstesting
register.
those assets comprising 80% of the total net book value
on the register.
4. Compare the net book value of each selected asset to its total undiscounted cash
3. Calculate
flows, the those
and note total undiscounted cash
items for which theflows forecasted
net book forhigher.
value is each of the selected
These assets.
are unfavorable
variances.
5.
6. Record
Record an
theadjusting
unfavorablejournal entryinforthe
variance allfixed
assets where
assets there issoanthat
register, unfavorable variance.
the net book
values of all affected assets are reduced by their unfavorable variances.
7. Verify that the fixed asset register software is now recording adjusted depreciation for
the newly revised net book values.

Record Gain or Loss on Sale of an Asset

1. Verify that the notice of asset disposition includes a signed authorization form, a bill of
sale, and athe
2. Access payment from register,
fixed assets the buyer.flag the asset as having been disposed of, and note the
date of disposition.
3. In the register, note the original purchase cost of the asset, and its total accumulated
depreciation.
4.
5. Subtract the saleentry
Create a journal pricetoand the accumulated
record the sale. Thedepreciation from cost
original purchase the original asset
is a credit, thecost.
A positive remainder is a loss, while a negative remainder is a gain.
accumulated depreciation is a debit, a loss is recorded as a debit, and a gain is recorded
as a credit.approval
6. Obtain The amount
for thepaid by the
journal buyer
entry is athe
from debit to the cash
assistant account.
controller, and forward the
journal
7. File the completed journal entry in the journal entries binder, along with software.
entry form to the general ledger clerk for entry into the accounting supporting
documentation.
OBJECTIVE: In terms of the Companies (Auditor�s Report) Order, 2003 (CARO), we are required to comment
specifically on the matters referred to in paragraphs 4 and 5 of the Order. This Checklist forms the basis of our
reporting. It should, therefore, be properly and completely filled up by the Audit Manager/Senior Manager and should
be accompanied by a draft report. Sufficient working papers must be attached (and cross-referenced) to the Checklist
to demonstrate that our reporting is on the basis of checking considered necessary by us to report on the matters.
Wherever there are adverse remarks, these must be brought to the attention of Senior Manager/Partner and
discussed before a draft is prepared.

FIXED ASSETS:
1 Do the records show the following particulars?
a. Sufficient description of the asset for identification purposes
b. Classification
c. Location
d. Quantity
e. Year of purchase
f. Original cost
h. Particulars regarding retirement/disposal
i. Rate of depreciation
j. Accumulated depreciation to date
k. Does the aggregate original cost and depreciation to date extracted from these records
under
Note 1: individual heads  
For assets whose agree withkeeps
location the figures shown
changing forine.g.
theconstruction
books of account?
equipment,
sufficient record of movement / custody thereof needs to be maintained.
Note 2:   Assets of small individual values for eg., chairs, tables, etc., may be conveniently
grouped
Note 3:  for the purposes
Quantitative of entry
details shouldin the register.beSimilarly
preferably mentioned for assets
on the having a common
following lines: rate
of depreciation, it may not be necessary to indicate the accumulated depreciation for each
(a) forinstead,
item; land:- based on survey
depreciation numbers
for the group as a whole may be shown.
(b) for leaseholds:- based on individual leases
(c) for buildings:- based on their usage; e.g. factory, office, service, township etc.
(d) for P&M:- based on fixed or movable
(e)  for electrical installations:- on the same basis as buildings
(f)  for F&F:- based on value, i.e. for high value on individual and for other items on group
basis.
(g) for patents, trade marks and designs:- based on purchase agreements
(h) for vehicles:- based on registration books.
2 For assets acquired prior to 1/4/56, where the original cost cannot be ascertained, the book
value as on that date is considered as the cost.

3 Assets, which have been fully depreciated, continue to appear in the records until sold,
scrapped or retired.

4 a. Was physical verification of   assets done? If so, particulars of locations covered and types
of asset verified to be documented.

b. What was the date of the last verification?

c. Is there adequate evidence of   this?
d. Is there a regular programme for verification and if so, what is the frequency?

Note: It is advisable that a written policy is framed in respect thereof.

e. Is the frequency reasonable in the context of the size of the Company and the nature of the
assets?
Note: While annual verification is preferable, if impracticable, the verification programme
f. should
Did thebe such that
physical all assets bring
verification are verified
to lightatany
least once indiscrepancies?
material three years. The extent of
g. the
Howdiscrepancies needs
have these been dealtto be documented.
with?
h. If the discrepancies are material, are they properly dealt with in the accounts and/or
i. disclosed?
Obtain Management Representation confirming that the fixed assets were physically
5 a. verified in accordance
Has a substantial with
part of theassets
fixed laid downbeen policy, if any,
disposed offindicating
during thethe details
year basedof the material
on our
discrepancies,
review if
of the fixedany, noticed.
assets In case
schedule there
(including is no written
disclosure policy laid
�Assets
of and down, the
held of disposal�
forDirectors in
Note: Obtain
representation minutes
should of the meetings
indicate of the General
theofperiodicity Body
of verification. the Board and
accordance
review the towith
same AS-10),
with minutes
regards to the the general
disposalthe meeting,
of fixed assets,Board or
which� any committee
forms or other
a substantial part
b. If answer
documentary
in the business
(a) is yes,
evidence has this
obtained
of the client. and discussions�with
affected goingtheconcern
Management? assumption?
Answer the following questions to ascertain the same: 
i. Is the part disposed off, integral to the business of the Company?
ii. Is the amount material in relation to size of the asset block?
iii. If the answer to (i) and (ii) above is yes, is the risk of going concern mitigated by factors
iv. such
Please asfill
theupManagement �s plan
Form 2360 Model to adopt
Audit a more
Program- profitable
Going Concern lineand
of business
conclude or for
generating funds for fresh acquisitions of fixed assets based on a review of the
Management�s plan to implement the same and its feasibility, the outcome of which would
improve the Company�s operations and financial position?
COMMENTS/W.P. REF.