Fixed Assets

Question 1

How does an auditor test the existence of fixed asset?

Answer 1

Believe in the beginning balance

Look to additions and disposals of fixed assets (look to support documentation, examining the actual assets)

Question 2

How do you test disposal?

Answer 2

Trace proceeds to cash receipt journal

Question 3

How do you test completeness?

Answer 3

Review “repairs and maintenance expense”

Review lease agreements where there might be an omission

Question 4

How do you test rights and obligations?

Answer 4

Inquire of management that may be used as collateral

Question 5

How do you test valuation?

Answer 5

Recalc depreciation

Test impairment- inquire of management of any such impairment and document in management rep letter