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FA Verification

Sanjay (Student) (112 Points)

16 December 2008

Hi Friends,

I have to perform the FA verification in a private limited company. I want to know some tips and compliances of Fixed Assets Audit?

Thanx

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12 Replies

Ravikumar.G (Consultant) (18525 Points)
Replied 16 December 2008

Guidance Note on Audit of Fixed Assets

Read the guidance note issued by the ICAI.

This Guidance Note outlines the procedures of the auditor in relation to the audit of fixed assets. It highlights the peculiar features of fixed assets, which impact the audit thereof. The following are the important aspects of audit of fixed assets, covered by the Guidance Note:

Internal Controls: control over expenditure on fixed assets, self constructed assets, accountability and utilisation controls, information controls.

Verification of Records: acquisition of new fixed assets, improvements to existing ones, self constructed assets, capital work‐in‐progress, scrutiny of expense accounts, audit procedures in respect sold, destroyed or scrapped assets, procedures to identify unrecorded transactions in respect of such assets.

Physical verification: management’s responsibility in respect of physical verification, factors to be considered in assessing the appropriateness as well as reasonableness of the physical verification conducted by management, auditor’s duties in case of discrepancies noticed on physical verification.

Valuation and Disclosure: compliance with the generally accepted bases of accounting, calculation of depreciation, revaluation of fixed assets and using the work of experts in case of revaluation etc., assets purchased for a consolidated price, joint ownership of assets

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Sanjay (Student) (112 Points)
Replied 16 December 2008

Sir,

Thanking you for your reply. I need to know about the compliances and procedures for physical verification of asset.

Rahul (CA Final Student) (280 Points)
Replied 30 December 2008

pls forward the same to all

chandra sekher agarwal (Service) (58 Points)
Replied 09 September 2009

Dear All, Can I get the full tesxt of Guidance Notes on Audit of Fixed Assets.

Kaustuv (Practicing CA) (1778 Points)
Replied 09 September 2009

Originally posted by :chandra sekher agarwal
"	Dear All, Can I get the full tesxt of Guidance Notes on Audit of Fixed Assets.	"

Here it is..:)

Attached File : 11 gn audit of fa.doc downloaded: 1131 times

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Nikky (Chartered Accountant) (552 Points)
Replied 10 September 2009

Thanks for the file

chandra sekher agarwal (Service) (58 Points)
Replied 10 September 2009

Hi Dear,

Thanx for updation.

But I have another query,

Where the co is providing depreciation for law value as follows

Assets costing Rs 5000/- or less are fully depreciated fully in the year of purchase. It is mandotory for the company to route such assets through Fixed Assets register.

Regards,

C S Agarwal

Kaustuv (Practicing CA) (1778 Points)
Replied 10 September 2009

ICAI Statement on CARO 2004 states as follows:-

Schedule XIV to the Act provides that depreciation on assets, whose actual cost does not exceed rupees five thousand, shall be provided at the rate of hundred percent. The records of fixed assets should include the necessary particulars in respect of such assets also. However, Schedule XIV to the Act further provides that where the aggregate cost of the individual items of plant and machinery costing Rs. 5000/- or less, constitutes more than 10 percent of the total actual cost of the plant and machinery, the same would have to be depreciated as per rates of depreciation provided in item II, Plant and Machinery, of the Schedule. The auditor should, therefore, examine whether the company has an appropriate mechanism in place to ensure compliance with this provision of Schedule XIV.

So, in this case it is recommended to include details related to these assets as well.

chandra sekher agarwal (Service) (58 Points)
Replied 11 September 2009

Thanx for the clarification

chandra sekher agarwal (Service) (58 Points)
Replied 24 September 2009

Hi all,

Whether depreciation on installation of electricity to be provided as per dep rate of Schedule XIV i.e., 1.63 % on SLM or there is different rate of depreciation for electrical installation in office building

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Batul (Article assistant) (207 Points)
Replied 27 October 2009

Confirm the following points while doing fixed assets verification:-

1)That the assets were in existence on the date of balance sheet

2)That the assets had been acquired for the purpose of the business and under proper authority

3)That they were free from any lien or charge not disclosed in the balance sheet

4)Verification of documents pertaining to assets

5)Depreciation on assets

6)Verification of existence of assets

7)Examine details of the cost of additions debbited to these accounts so as to ascertain only cost of genuine additions has been debited to such accounts