The fixed asset audit procedures are for those assets that are expected to last more than just a year such as land, buildings, assets, and equipment. Fixed assets are primary resources for the business. Asset audit is necessary to do once a year to update all the records of assets in a proper manner.
If there is no track and record of assets, you might have to pay a huge amount of money. Due to increased displacement, loss, and undocumented assets which affects the business.
Also, rightly followed audit procedures will capture the important details such as serial number, date of purchase, schedules of maintenance, etc.
Following are the measures for fixed asset auditing procedure:
- All the information such as the description of the asset, classification, location, quantity, purchase cost, date of purchase, details of revaluation, rate of depreciation, accumulated depreciation, depreciation for the current year, etc. are required to be mentioned in the asset record.
- Description of a manufacturer, serial number, and model.
- Correct depreciation calculation
- Proper tagging
- Documentation of asset movements
Also Read: How Does Asset Management Software Help in Audits?
Audit Procedures with Asset Management Software
Asset management software enables you to capture all the fixed assets information electronically such as barcode number, description, location, fixed asset classes, departments and cost centers, serial numbers, etc.
Therefore, the above data can be captured automatically or can be entered manually on the go. This helps in keeping track of the correct value of assets, as well as in the computation of depreciation and taxes.
A fixed asset auditing procedure includes the use of barcode technology to make asset verification simple and efficient. Asset management software also allows creating any compliance reporting, accounting, or other international jurisdiction compliance reports as per the requirement.
The audit procedure for accounting ensures the existence of assets in an organization. There are some procedures that are used to verify the existence of different categories of assets while auditing. For example, buildings, heavy equipment, and other fixed assets existence will be verified through observation only.
Through asset audit procedures, it is identified that the assets in the company are at its current location. And as the process moves ahead, it helps to prepare the accurate balance sheet ensuring regulatory compliance. Also, accurately performed asset audit procedures provide better internal control.
The audit procedure allows generating a detailed report on an all-inclusive and exhaustive methodological system of a meticulous inspection of a company's assets. This is why paper-based inspection processes are an inefficient method. As it fails to reveal a variety of risks involved in the business organization such as:
- Avoidable maintenance costs
- Manufacture Quality Assurance issues
Other than these factors, the manual approach for inspection can incur issues in compliance, health, and safety regulations due to clerical error or mishappenings.
These key points enable an asset management system to be designed in such a strategic application that allows the efficiency of the inventory audit procedures.
Hence, it will surely bring value to the business and make relevant returns up to the bottom level.
Purpose of Audit Procedures
Audit procedures are generally performed to confirm the financial assertion of the transactions or events that have occurred in the financial statements, and they are designed in a certain way.
The team tests the occurrence of sales revenues through an internal audit that is recorded in the financial reports and income statements for that particular period. The test is done to confirm the transactions if they have actually occurred or not.
An accurate understanding of financial statements assertion helps perform the actionable and effective audit procedures to make the tests more efficient.
Our cloud-based audit assistant platform will provide your team with enhanced access, visibility, and reporting capabilities, driven by extensive risk advisory experience.
Asset Infinity's internal auditing software can help you increase productivity, efficiency, and standardization throughout your audit process.
Also Read: What Is Stock Audit? Why Is It Done and What Are the Stock Audit Processes?
Through the internal auditing software, you can follow the audit procedure to:
- Manage your audit activity
- Perform your audits collaboratively
- Communicate audit results and reporting
- Monitor the progress of your follow-up process
Also, you can easily view and edit files and documents online with any changes & save back to associated work papers. Teams can truly collaborate in real-time to increase efficiency during documentation and review as well.
Benefits of Internal Audit Procedure
1. Boost Productivity
Set an audit workflow and automatic alerts and notifications for audit scheduling and task assignments that boost productivity.
2. Get Organized
Store your entire audit plans, document work, findings, reports, and other documents in a digital library to be safe and organized.
3. Prioritize Resources
Conduct a risk assessment to define and prioritize audit procedures, plans and use built-in tools and resources to guide for the development of a strategic, enterprise-level internal audit framework.
4. Improve Compliance
Verification of compliance with laws and regulations is important and required to improve external audit readiness with a system that aligns with the Institute of Internal Auditors (IIA) standards.
5. Reduce Risk
Implement a consistent, structured auditing process across your organization to reduce every kind of risk involved.
6. Increase Accountability
Keep track of audit work and status with automated task management features, and corrective action plans to increase accountability.
After the verification of assets' existence, their current value needs to be established. Starting with its acquisition cost, invoice cost, verified freight costs, and taxes paid (mostly, state sales taxes, and other costs involved, such as set-up costs).
Streamlined audit procedures verify the fixed assets in an organization and also help to reduce some of the common frauds that occur when you get lenient with your assets, such as:
- It is not possible that all the assets are unmanageably large. Some of the equipment like computer systems, disk drives, and scientific equipment is amongst the common types of business equipment that any organization holds.
Also, some of the equipment might not be active in the service all the time. For example, it is easy for $10,000 equipment kept in storage, to go missing without getting noticed. It is nearly impossible to establish when the theft actually occurred.
- An asset that is purchased always has its acquisition and also the same is sold for some value (or lower value), which is never registered or on documents.
- It is the popular kind of fraud faced by businesses that weaken its financial position. More the value of the fixed asset, the company's overall asset position improves when the value is misrepresented.
Also Read: How Effective Are Mobile Audits to a Business?
Frequently Asked Questions (FAQs)
1. How would you describe an audit procedure?
A set of actions and procedures to control an organization is known to be an asset audit procedure. They are done to test and prove the processes that are being conducted effectively.
2. What is the audit and audit process?
Auditing is defined as the on-site verification activity, such as inspection or examination, of a process or quality system, to ensure compliance to requirements. An audit can apply to an entire organization or might be specific to a function, process, or production step.
3. What is an audit summary?
At the completion of the audit, the findings need to be reviewed, organized, and presented in a coherent format that can be circulated and reviewed by management as well as other individuals within the organization. The output of this process is the audit summary report (ASR).