I. Fixed Asset Audit
(I) Audit Objectives of Fixed Assets
To determine whether fixed assets exist; to determine whether fixed assets are owned by the audited entity; to determine whether the records of additions to, deletions from, and changes in fixed assets are complete; to determine whether fixed assets are valued appropriately; to determine whether the ending balances of fixed assets are correct; to determine whether the whether the disclosure of fixed assets on the accounting statements is appropriate.
(2) Substantive Testing of Fixed Assets
(1) In the case of a continuous standing audit, care should be taken to reconcile with the audited closing balances of fixed assets and accumulated depreciation in the audit working papers of the previous period;
Judgmental: In the case of a continuous standing audit, the CPA's review of the opening balances of fixed assets and accumulated depreciation will opening balance with the closing balance of the previous year to check for consistency.
Explain x
(2) In the event of a change in the audited entity's engagement of a CPA firm, the subsequent CPA should second and refer to the relevant working papers of the predecessor CPA, and the scope of the subsequent CPA's review is usually limited to a general review if all previous periods were audited by CPA firms of good standing;
(3) If the audited unit has not been audited by a CPA in the past, i.e., in the case of an initial audit, the CPA should conduct a more comprehensive audit of the opening balance, especially if the audited unit has a large number of fixed assets, a large value, and a high proportion of total assets.
2. Analytical review
(1) Calculating the ratio of the original value of fixed assets to the product output of the current period and comparing it with the previous periods may reveal problems such as idle fixed assets or fixed assets that have been reduced and not written off in the accounts.
(2) Calculate the ratio of depreciation charged for the current period to the total cost of fixed assets, and compare this ratio with the previous period, with the aim of discovering errors in accounting for depreciation in the current period.
(3) Calculate the ratio of accumulated depreciation to the total cost of fixed assets, comparing this ratio with the previous period, aiming to find errors in accounting for accumulated depreciation.
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3. Checking the increase in fixed assets → for fixed assets from different sources
(1) For purchased fixed assets, check whether they are correctly valued, and whether their recorded value includes the purchase price and taxes
(2) For self-constructed fixed assets, a series of expenditures made before they reach their intended useable state should be (2) For self-constructed fixed assets, a series of expenditures before reaching the intended state of use should be included in the book value of fixed assets. The capitalized portion of the borrowing costs is subject to accounting requirements.
(3) Fixed assets invested by investors shall be recorded at the value recognized by both parties.
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4, check the reduction of fixed assets
The reduction of fixed assets mainly includes the sale, transfer of investment to other units, transfer of debt to creditors, scrapping, destruction, and inventory loss
The key points of the audit are as follows:
(1) check the reduction of fixed assets (1) Check the authorization and approval documents for the reduction of fixed assets
(2) Check whether the accounting treatment for the reduction of fixed assets for different reasons is in accordance with the relevant regulations and verify the accuracy of the calculation of the amount.
(3) In conjunction with the fixed asset liquidation and the account of profit and loss on property to be disposed of - profit and loss on fixed assets to be disposed of, spot-check whether the amount of fixed asset book transfer is correct.
(4) Check whether there are fixed asset reduction operations that have not been recorded in the accounting records.
6, check the ownership of fixed assets
(1) for purchased machinery and equipment and other fixed assets, usually review the purchase invoices, purchase contracts and so on to be determined;
(2) for fixed assets under finance leases, should verify the relevant finance lease contract, to confirm that it is not an operating lease;
(3) for real estate fixed assets, you need to check the relevant contracts, title certificates, property tax contracts. contracts, title certificates, property tax bills, repayment certificates of mortgage loans, insurance policies and other written documents.
7. Field observation of purchased fixed assets
Field observation focuses on the new additions of important fixed assets in the current period; for the first audit, the scope of observation should be expanded appropriately.
8. Determine whether the estimated useful life and residual value of fixed assets by the audited entity are reasonable
9. Check the leasing of fixed assets→This should be judged in conjunction with accounting knowledge
10. Check the insurance of fixed assets
11. Investigate unused and unneeded fixed assets
12. Check the fixed assets adjusted by the liquidation of assets and asset evaluation
13. Valuation adjustment of fixed assets
13, checking the mortgage and guarantee of fixed assets
14, checking the acquisition of fixed assets
15, checking whether there is any purchase and sale of fixed assets with related parties
16, checking whether the fixed assets have been appropriately disclosed in the balance sheet
II. Audit of Accumulated Depreciation
(I) Audit Objectives of Accumulated Depreciation
(II) Substantive Testing Procedures for Accumulated Depreciation
1. Obtain or prepare a summary of fixed assets and accumulated depreciation classifications, review the additions for correctness, and reconcile them to the statement counts, general ledger counts, and ledger totals.
2. Check whether the depreciation policies and methods formulated by the audited entity are in accordance with the provisions of the "Enterprise Accounting System", and determine whether the depreciation methods it adopts can reasonably apportion the cost of fixed assets over their useful lives, whether the preceding and following periods are consistent, and whether the estimated useful lives and estimated net residual values are reasonable.
3. Depending on the situation, choose the following methods to conduct an analytical review of accumulated depreciation → Learn in conjunction with the analytical review of fixed assets
(1) Review the overall reasonableness of the depreciation accrual
(2) Calculate the ratio of depreciation accrual to the original value of the fixed assets for the current period and compare it with that of the previous period to analyze the reasonableness and accuracy of the depreciation accrual for the current period.
(3) Calculate the ratio of accumulated depreciation to the original value of fixed assets and analyze the reasonableness of the ratio in conjunction with the provision for impairment of fixed assets.
4. Review whether the depreciation expense for the current period is correctly provided for
(1) fixed assets for which provision for impairment has been made, whether the depreciation provided for is correct;
(2) fixed assets for which provision for impairment has been made in full, whether depreciation has been discontinued;
(3) fixed assets containing land use rights, whether the depreciation method is in accordance with the relevant regulations, whether the depreciation provided for is correct;
(4) fixed assets with land use rights, whether the depreciation method is in accordance with the relevant regulations, whether the depreciation provided for is correct; and (4) Whether depreciation of fixed assets ceased to be used due to renewal and renovation and whether depreciation of fixed assets ceased to be used due to overhaul is provided;
(5) Whether depreciation of fixed assets capitalized in accordance with regulations is provided in a reasonable and separate manner over the shorter of the period between the two renovation periods and the useful life of the fixed assets and the fixed asset is depreciated in the next renovation period;
(6) Whether depreciation of fixed assets is provided separately and in the next renovation period, the fixed asset is depreciated separately and in the next renovation period. The balance of the renovation of the fixed asset at the time of the next renovation shall be included in the current non-operating expenditure in one go;
(6) Whether the renovation costs of fixed assets capitalized under finance leases are separately depreciated by a reasonable method over the shorter of the period of the two renovations, the remaining lease term, and the useful life of the fixed asset;
(7) Whether the renovation costs of fixed assets capitalized under finance leases are depreciated over the shorter of the two renovation periods, the remaining lease term, and the useful life of the fixed asset; and Depreciation;
(7) Whether improvement expenses incurred on fixed assets leased under operating leases are depreciated separately by a reasonable method over the shorter of the remaining lease term and the useful life of the leased asset;
(8) Whether depreciation is provided for unused, unneeded and temporarily idle fixed assets in accordance with the regulations.
In accordance with the provisions of the "Business Accounting Standards - Fixed Assets": the fixed assets for which provision for impairment has been made should be recalculated in accordance with the book value of the fixed assets and the useful life of the fixed assets to determine the rate of depreciation and the amount of depreciation; if the value of the fixed assets for which provision has been made has been restored, the value of fixed assets should be recalculated in accordance with the restored book value of the fixed assets and the useful life of the fixed assets to determine the amount of depreciation. If the value of fixed assets for which provision for impairment has been made is restored, the depreciation rate and depreciation amount shall be recalculated according to the recovered book value of fixed assets and the remaining useful life. When the depreciation of fixed assets is adjusted due to the provision for impairment of fixed assets, the accumulated depreciation previously provided is not adjusted.
5, check whether the allocation of depreciation expense is reasonable, and whether the allocation method is consistent with the previous period
6, pay attention to changes in fixed assets
7, will be "accumulated depreciation" account credit depreciation for the current period and the corresponding cost of depreciation expenses in the debit account, to identify the depreciation expense. In order to find out whether the depreciation amount has been fully amortized to the product cost or expense of the current period
8. Combined with the audit of fixed assets, check whether the calculation of depreciation is correct
9. For the adjustment of accumulated depreciation due to the evaluation of the assets, obtain the relevant asset valuation report to check whether the accounting treatment is correct
10. Check the appropriateness of disclosure of accumulated depreciation
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