Fixed Assets Audit Programme

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A Risk Based Audit Program for

Fixed Assets

This spreadsheet is a framework for a Risk Based AuditProgramme for fixed assets. It requires modifying for your

organisation.

Details for using this Risk Based Audit Programme areincluded in the book 'Compilation of a Risk and Audit

Universe' available on www.internalaudit.biz

David Griffiths13 October 2013


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Fixed Assets Audit ProgrammeIntroduction

Objective of this programme

The programme is a framework which is there for you to change foryour objectives, risks, controls and tests.It is not complete, since it is intended to present suggestions. You haveto complete it.Controls, and the audit tests to check them, are vague in thisframework because they cannot be based on an actual process. Youmust make them specific to your process.

(Note that some cells have been completed with examples to give anidea of the information which would be input into them)

Audit stagesThe stages of an audit may include the following (see figure 5 in 'Theintroduction to Risk Based Internal Auditing):

Define the scope in terms of risks to be checkedMeet staff involved to discuss scope and the audit process. Find outabout any risk registers they have.

Carry out walk through tests, that is, follow a representative sampleof transactions through the processes in order to fully understand theprocesses and the risks they face.Identify risks from auditor perspectiveFinalise the scope of the auditHold a risk workshop to identify all risks (auditors' andmanagement's) and score them

Carry out audit tests to check the operation of the controls managingrisksDiscuss the audit findings with the staff involved.Write the draft reportDiscuss the draft reportIssue the final reportCarry out follow up work, if necessary, to ensure that action is takenwhere agreed.

(staff = people (including managers) employed by the company eitherdirectly (as employees) or indirectly (as contractors))


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Introduction (This page). Gives the objectives of this programme and asummary of the main stages.

Scope An example scope for a fixed asets audit

Mindmap Since the mind map is so large, this page gives a referenceto the on-line version

Audit details The primary function being audited and where it stands in theorganisation (see the COSO 'cube')

Auditprogramme

The audit programme for fixed assets. It will have associatedaudit test schedules.

Column key Details of the contents of each column on the programmeFlow chart A flowchart showing typical processes in and around

processes for accounting for fixed assetsAudit history History of previous auditsFunctions A hiearchy of functions involved with fixed asset accounting.

Necessary to complete the 'owner' columns of thespreadsheet.

Scoring risks Criteria used for scoring the risks.

Risk based internal auditing by David Griffiths is licensedunder a Creative Commons Attribution-NonCommercial 3.0Unported License.

This spreadsheet

Has the following workbooks:
http://creativecommons.org/licenses/by-nc/3.0/http://creativecommons.org/licenses/by-nc/3.0/http://creativecommons.org/licenses/by-nc/3.0/http://creativecommons.org/licenses/by-nc/3.0/http://creativecommons.org/licenses/by-nc/3.0/http://creativecommons.org/licenses/by-nc/3.0/


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Fixed Assets Audit ProgrammeScope

Purpose of auditTo conclude on whether:

Risks hindering the achievement of objectives have been properly identified,evaluated and managed.Internal controls are operating properly to mitigate these risks to levels defined asacceptable by board policy. Action is being taken to improve controls, where risks are not being properlymanaged.More monitoring, by management, is necessary to ensure proper internal controlsinto the future.

Objectives of the fixed assets accounting processesThe primary objectives of the fixed asset accounting processes are:

There is a clear strategy for the operation of the processes, now and into the future

Data input into the system is complete, accurate and on a timely basisThe asset register is properly updatedThe financial balance on the ledger is correct

Assets are protected against lossData is protected against lossSufficient, knowledgable staff are available to operate the processes

These objectives are expanded in the audit programme

Work programmeDiscuss the audit process with staff

Determine if any risk assessment has been doneUnderstand the processes in operationIdentify risks from auditor perspectiveFinalise the scope of the auditHold a risk workshop to identify all risks (auditors' and management's) and scorethemCarry out audit tests to check the operation of the controls managing risksDiscuss the audit findings with the staff involved.Discuss the draft reportIssue the final report

Special considerationsManagement have asked internal audit to especially check the security of IT assets

Personnel

Timing


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Recipients


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FixeMind


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d Assets Audit Programme ap

The mind map used to create the audit programme can be found at :

http://www.dmgriffiths.com/rbia/files/programmes/fixedassets/Fixed_assets_audit_programme.html
http://www.dmgriffiths.com/rbia/files/programmes/fixedassets/Fixed_assets_audit_programme.htmlhttp://www.dmgriffiths.com/rbia/files/programmes/fixedassets/Fixed_assets_audit_programme.html


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Fixed Assets Audit ProgrammeAudit details

Audit Group FALast audit number 123

Audit name Fixed Assets

Department Fixed asset accountingFunction FinanceOperating unit UKDivision RetailEntity Retail PLC

Process(es) Fixed assetsITSecurity


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Account for fixed Assets.mmp Account for Fixed Assets

Fixed Assets Audit ProgrammeNo L1obj L1 Objectives L1risk L1 Risks L2obj

No L1obj L1 Objectives L1risk L1 Risks L2obj

1

Maintain profit ofexisting business

Processes do not support thebusiness

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Maintain profit of

existing business

Processes do not support the

business

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Maintain profit of

existing business


business

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52Maintain profit ofexisting business


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Maintain profit of

existing business


business

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Maintain profit of

existing business


business

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79Maintain profit ofexisting business Processes do not support thebusiness

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82



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94

Maintain profit of

existing business


business







98



99

Maintain profit of

existing business


business







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104



105

Maintain profit ofexisting business Processes do not support thebusiness

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130

Maintain profit of

existing business


business











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Maintain profit of

existing business


business









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145



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157 Maintain profit ofexisting business Processes do not support thebusiness



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162Maintain profit ofexisting business Processes do not support thebusiness

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165



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173 Maintain profit ofexisting businessProcesses do not support thebusiness

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178 Maintain profit ofexisting business Processes do not support thebusiness

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L2 Objectives L2risk L2 Risks L3obj

L2 Objectives L2risk L2 Risks L3obj

Account for fixed assets Processes are not fit for purposeor will not remain fit for purpose








Account for fixed assets Processes are not fit for purpose

or will not remain fit for purpose



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Account for fixed assets Processes are not fit for purpose

or will not remain fit for purpose



Account for fixed assets Incorrect set up data



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Account for fixed assets Incorrect standing data
















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Account for fixed assets Transaction data used to updatebalances is incorrect

Account for fixed assets Transaction data used to update

balances is incorrect

















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Account for fixed assets Transaction data used to update

balances is incorrect Account for fixed assets Incorrect balances

Account for fixed assets Incorrect balances







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Account for fixed assets Incorrect output


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Account for fixed assets The databases are corrupted ordestroyed








Account for fixed assets The databases are corrupted or

destroyed Account for fixed assets The databases are corrupted or

destroyed


Account for fixed assets Assets are stolen, damaged orlost






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Account for fixed assets Assets are stolen, damaged or

lost

Account for fixed assets Assets disposals do not achievemaximum value












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Account for fixed assets Resources do not support theobjective






Account for fixed assets Resources do not support the

objective Account for fixed assets Resources do not support the

objective

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L3 Objectives L3risk

L3 Objectives L3risk

Maintain a strategy which ensures the process achievesmaximum efficiency and effectiveness now and in thefuture





Maintain processes to ensure that tax, disclosure andother legal requirements are followed



Maintain processes to ensure that tax, disclosure and

other legal requirements are followed



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Maintain processes to ensure that company policies areestablished and communicated








Maintain processes to ensure that company policies are

established and communicated



Data used for set up was complete, accurate and complied

with regulations

Data used for set up was complete, accurate and compliedwith regulations


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Data used for standing data was relevant, complete,accurate and complied with regulations



Data being used to update standing data is relevant,complete, accurate, timely and complies with regulations






Data being used to update standing data is relevant,

complete, accurate, timely and complies with regulations







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The fixed asset register is sufficiently detailed to enablesignificant assets to be physically identified
















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Transaction data being used to update balances isrelevant, complete, accurate, timely and complies withregulationsTransaction data being used to update balances isrelevant, complete, accurate, timely and complies withregulationsTransaction data being used to update balances isrelevant, complete, accurate, timely and complies withregulationsTransaction data being used to update balances isrelevant, complete, accurate, timely and complies withregulationsTransaction data being used to update balances isrelevant, complete, accurate, timely and complies withregulationsTransaction data being used to update balances isrelevant, complete, accurate, timely and complies withregulationsTransaction data being used to update balances isrelevant, complete, accurate, timely and complies with

regulationsDepreciation is correctly calculated

Depreciation is correctly calculated



Cumulative depreciation is correctly updated

Cumulative depreciation is correctly updated

The balance total agrees with that in the general ledger






All balances are comprised of transactions which areidentifiable, authorised and valid

All balances are comprised of transactions which areidentifiable, authorised and valid

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Output data is relevant, complete, accurate, timely andcomplies with regulations






The database is secured against alteration, other than bypermitted transactions



Malicious corruption is prevented

Corruption by malfunctioning IT systems is prevented



Physical damage to hardware is prevented




Assets are secured against theft




Assets are protected against loss

Assets are protected against loss

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Assets are protected against damage








All fixed asset disposals are authorised at the appropriatelevel







A number of quotes (or alternative information) areobtained before disposal and proceeds received aremonitored against expectations





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Assets are removed from the asset register correctly



All redundant assets are identified on a timely basis andappropriate plans made for their future disposal








Maintain the IT systems which support the existingbusiness





Recruit and train staff to maintain existing business



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L3 Risks Objective type(COSO)

L3 Risks Objective type (COSO)

The strategy does not contain clear objectives, is notfinancially justified or documented

Operations

Strategy does not address all the significant risks Operations

Objectives within the strategy are not achieved Operations

Objectives within the strategy are not achieved Operations

The strategy is not communicated to relevant staff Operations

Information relating to specific accounting or taxationrequirements may not be obtainable, or may be opento misinterpretation.

Compliance,Reporting





Information relating to specific accounting or taxation

requirements may not be obtainable, or may be opento misinterpretation.

Compliance,

Reporting

Legislation may not be followed or understood. Compliance


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Company policy may not be clear. Compliance

Company policies are not adhered to. Compliance

Company policies are not adhered to. Compliance

Policy may not take account of new asset categories Compliance

Policy may not take account of latest accepted bestpractice

Compliance

Policy may not take account of latest accepted bestpractice

Compliance

Examination and review of actual policies followedmay not be done on a regular basis.

Compliance

Risks to the processes are not identified Operations




Data supplied was incorrect Operations. Reporting.

Compliance

Data was input incorrectly Operations. Reporting.Compliance

Data was input incorrectly Operations. Reporting.Compliance

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Malicious/fraudulent data set up Operations. Reporting.Compliance



Asset descriptions (including asset type) may beincorrect.

Operations


Operations


Operations


Operations

Asset descriptions may be vague, omit assetlocations, omit individual asset number

Operations


Operations


Operations


Operations

The register may not show the correct quantity ofassets

Operations


Operations


Operations


Operations


Operations

The register is not organised and structured to alloweffective and efficient use Operations

The register is not organised and structured to alloweffective and efficient use

Operations


Operations

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Operations

Data supplied is inaccurate

Data supplied is inaccurate

Data is input incorrectly



Data supplied is incomplete or not supplied




Capital expenditure classed as revenue



Revenue expenditure classed as capital



Data is input at the wrong time

Data is input at the wrong time

Data does not conform to regulations

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Malicious/fraudulent data set up




Asset assigned to wrong category

Depreciation rate for category is incorrect

Processing miscalculates depreciation

Asset is not depreciated

Monthly depreciation not added to cumulative

Monthly depreciation not added to cumulative

Data input directly into GL without a systemtransaction

Data not transferred from system to GL




Timing differences between system and GL input

Items making up the balance cannot be identified withauthorised transactions


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Items making up the balance cannot be identified withindependent data

Fixed assets that have been mislaid, scrapped ormisappropriated are still recorded in the accountingrecords

Fixed assets that have been mislaid, scrapped ormisappropriated are still recorded in the accountingrecordsFixed assets that have been mislaid, scrapped ormisappropriated are still recorded in the accountingrecordsThe carrying cost of assets in the register areincorrect

Items making up the balance are overdue

Items making up the balance don't comply withregulations

The cumulative depreciation is incorrectly stated



Physical assets are obsolete




Physical assets are in poor condition

Physical assets do not exist

Output data is not relevant

Output data is not relevant

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Output data is incorrect

Output data is incorrect

Output data is incomplete

Data is output at the wrong time

Output data does not conform to regulations

Output data does not conform to regulations

Unauthorised alterations occur

Unauthorised alterations occur

Unauthorised alterations not detected

Computer virus corrupt database

Malfunctioning hardware or software corrupts data

Malfunctioning hardware or software corrupts data

Incorrect IT procedures result in incorrect restorationof files

Hard drives and other storage media damaged

Hard drives and other storage media damaged

Hard drives and other storage media stolen

Hard drives and other storage media stolen

Inadequate physical security over fixed assets




Assets are inappropriately covered by insurance toprovide replacements.

Assets are inappropriately covered by insurance toprovide replacements.

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Business continuity may be compromised by the lossof key business assets



Assets are damaged as a result of poor storage

Assets are damaged as a result of poor storage

Assets are damaged by length of storage



Disposal authorisation signatories may be invalid: e.g.out of date, not formally authorised, not authentic



Assets may be scrapped / disposed without beingnotified or authorised.

Assets may be scrapped / disposed without beingnotified or authorised.

The wrong asset may be disposed of through pooridentification

The wrong asset may be disposed of through pooridentification

Independent quotes are not always obtained.

The most appropriate quote is not adopted

The most appropriate quote is not adopted

The urgency of disposal may limit sale opportunities

The urgency of disposal may limit sale opportunities

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Sale proceeds: are not received or not received on atimely basis

Incorrect asset removed

Incorrect asset removed

Profit / Loss on disposal not accurately accounted forat time of disposal

Assets are not identified

Assets are not identified

Assets are wrongly identified

Assets are wrongly identified

Assets may be required in the future

Alternatives are not properly considered (e.g. theasset could be used elsewhere in the business, theasset could be upgraded or improved

Alternatives are not properly considered (e.g. theasset could be used elsewhere in the business, theasset could be upgraded or improved

Alternatives are not properly considered (e.g. theasset could be used elsewhere in the business, theasset could be upgraded or improvedFunction does not achieve maximum efficiency

IT systems lose data

IT systems fail

Programs miscalculate data

Programs miscalculate data

Insufficient staff to maintain business operations

Insufficient staff to maintain business operations

Business operations fail due to lack of staff knowledge

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Consequence of risk Risksource

IRC IRL IRS

Consequence of risk Risk source IRC IRL IRS

Complete system failure due to notkeeping the system up-to-date,Excessive costs because theprocesses are inefficient

Risk applies toall objectivehierarchies

4 5 20



4 5 20



4 5 20



4 5 20



4 5 20

Tax is incorrectly calculated. Theaccounts are incorrect.


4 5 20



4 5 20



4 5 20

Tax is incorrectly calculated. The

accounts are incorrect.

Risk applies to

all objectivehierarchies

4 5 20



4 5 20



4 5 20

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4 5 20



4 5 20



4 5 20



4 5 20



4 5 20


Risk applies toall objective

hierarchies

4 5 20

Tax is incorrectly calculated. Theaccounts are incorrect. Inefficientprocedures.


4 5 20

Tax is incorrectly calculated. Theaccounts are incorrect. Inefficientprocedures.


4 5 20

Failure to identify risks will result in nointernal controls to mitigate them,which might have catastrpohicconsequencies


4 5 20

Failure to identify risks will result in no

internal controls to mitigate them,which might have catastrpohicconsequencies

Risk applies to

all objectivehierarchies

4 5 20

Failure to identify risks will result in nointernal controls to mitigate them,which might have catastrpohicconsequencies


4 5 20

Failure to identify risks will result in nointernal controls to mitigate them,which might have seriousconsequencies


4 5 20

Incorrect set up data could corrupt

important information with seriousresults

Fixed assets

department

4 5 20

Incorrect set up data could corruptimportant information with seriousresults

Fixed assetsdepartment

4 5 20

Incorrect set up data could corruptimportant information with seriousresults


4 5 20

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0


0


0


0


0


0


0


0


0


0


0


0


0


0


0


0


0


0


0

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0


0

Fixed assets

department

0


0


0


0


0


0


0


0


0


0


0


0


0


0


0


0


0

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0


0


0


0


0


0


0


0


0


0


0


0

Fixed assets

department

0


0


0


0


0


0


0


0


0

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0


0

Fixed assetsdepartment 0


0


0


0

Fixed assets

department

0


0


0


0


0


0


0


0


0


0


0


0


0

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0


0


0


0


0


0


0


0

Fixed assets

department

0


0


0


0


0


0

Fixed assets

department

0


0


0


0


0


0


0


0


0

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0


0


0


0


0


0


0


0


0


0


0


0



0


0


0


0



0


0

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0


0


0


0


0


0


0


0



0


0


0

Applies to allobjectives

0

Applies to allobjectives 0


0


0


0


0


0


0

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Internal control Function Internalcontrol owner

Internal control Function Internal control owner

The strategy is presented to the managementultimately responsible for the process with the clearobjectives and financial implications

Fixed assetaccounting

Fixed Asset AccountingManager

The strategy is presented to the senior managementwith the strategic risks and their managementincluded



Targets are set at the start of the year which detailhow to achieve the objectives



Targets are set for individuals which involveachieving the strategy's objectives



Staff are informed of the strategy at the start of theyear



Company accounting manual sets out specificreporting requirements and is readily available to allfunctions

Financial Accounting

Financial AccountingManager

The requirement to provide the above information isconsidered in building the fixed asset register



Company finance and tax departments monitorcapital expenditure (for e.g. capital allowances)issues and keep others informed through regularbulletins.

Tax Corporation TaxManager

External Audit are involved for statutory audit

purposes.

External Auditors Statutory Accounts

Manager

Tangible fixed assets section of the policy manualexists and is regularly updated for new legislation

Financial Accounting

Financial AccountingManager

Company requirements are formally monitored by thebusiness to ensure compliance.

Tax Corporation Tax andVAT Tax Managers

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Any new depreciation rates, or changes to existingrates, must be authorised by a senior financemanager



Use data from a trusted source Fixed assetaccounting


Check data on system to data on source Fixed assetaccounting


Run tests to check set up data is correct Fixed assetaccounting


Use data from a trusted source Fixed assetaccounting




Check output is correct Fixed assetaccounting Fixed Asset AccountingManager

Check all required data fields on system arecompleted



Exception reports to highlight incorrect or missingdata



Transfers of assets between businesses or businesslocations are recorded, authorised and accounted for


Lists of assets by business location or accountability

are periodically circulated to verify existenceFixed assetaccounting

Use a checklist and timetable Fixed assetaccounting

Use a checklist and timetable Fixed assetaccounting

Check data source conforms to regulations (bothcompany and legislation)


Set up computer edit checks to highlight suspectdata, such as incorrect tax calculations)

Fixed asset

accountingData to be approved by tax or legal specialists, ifnecessary


Restrict access to input screens Fixed assetaccounting

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Duties for updating data are divided so as to ensureno-one has responsibility for the entire transactioncycle


Exception reports to highlight unusual transactions Fixed assetaccounting

Training of staff to include notifying seniormanagement of any suspicious activity


A print of asset details & values input is obtained andchecked


Additions reconciled back to additions per accountingsystem


Lists of assets by business location or accountabilityare periodically circulated to verify existence




Detailed asset descriptions are recorded on theregister and includes unique asset reference number,asset location, date of acquisition


Assets are individually tagged and descriptionsverified






Quantity of assets is included in the detaileddescription


Quantity of assets is included in the detaileddescription

The use of pooled assets is avoided unless sensibleor practical to do so





The register is logically organised to reflect businessorganisations and reporting structures Fixed assetaccounting

The register records assets between plant andmachinery and computer equipment


Staff are familiar with / trained in its use Fixed assetaccounting

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Staff are familiar with / trained in its use Fixed assetaccounting

Edit checks to report inaccurate data Fixed assetaccounting

Use data from a trusted source Fixed asset

accountingEdit checks to report inaccurate data Fixed asset

accounting


Check output is correct Fixed assetaccounting

Feeder systems (e.g. purchase orders) shouldprovide all necessary data


Edit checks to report missing data Fixed assetaccounting

Check all required data fields on system arecompleted


Exception reports to highlight incorrect or missingdata


Clear company policy, based on legislation, whichdefines revenue and capital expenditure


Checks to ensure correct classification input toordering system


Exception reports to highlight excessive revenueexpenditure


Clear company policy, based on legislation, whichdefines revenue and capital expenditure


Checks to ensure correct classification input toordering system


Check that transaction is capital expenditure whensetting up asset


Edit checks to detect data input into wrong period orwith incorrect dates


Exception reports to highlight data posted in wrongperiod


All items should have passed through procedureswhich checked they complied with tax, company andstatutory regulations


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Check data conforms to regulations (both companyand legislation)


Set up computer edit checks to highlight suspectdata, such as incorrect tax calculations)


Data to be approved by tax or legal specialists, ifnecessary


Restrict access to input screens Fixed assetaccounting

Division of duties Fixed assetaccounting

Exception reports to highlight unusual transactions Fixed assetaccounting

Training of staff to include notifying seniormanagement of any suspicious activity


When asset is entered into fixed asset system, checkclassification is correct


Check set up data Fixed assetaccounting

Exception reports to highlight depreciation outsideexpected values


Exception report lists assets not depreciating Fixed assetaccounting

Reliant on computer programs to be correct Fixed assetaccounting

Check total depreciation equals difference in

cumulative

Fixed asset

accounting All data which affects the system balance to be inputvia the system


Month end check of balances formally noted on achecklist


Daily checklists (or as appropriate) to ensure data istransferred


The reconciliation between the FA register and GL isprepared and/or approved by an individualindependent of the upkeep / maintenance of theasset register.


The use of fixed asset suspense accounts isavoided. When used they are regularly reviewedand cleared.


Month end checklist to ensure all transactionstransferred from subsidiary ledgers to the GL


Only complete transactions to be posted (e.g.invoices, fixed assets)


No adjustments (such as journals) should be madewithout a clear audit trail to supporting documents


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Periodic check of balances to ensure all items arerelated to proper transactions


Periodic physical verification of fixed assets at leastonce every two years which includes verification ofcontinuing economic use, current value andpredicted economic useful life




Discrepancies are investigated and fixed assetregister amended accordingly


Regular housekeeping of register performed toidentify exceptions


Register is regularly reviewed and updated for assetsaffected by a permanent diminution in value orrevaluations


Exception reports to be produced showing overdue

items

Fixed asset

accounting All items should have passed through checkingprocedures which checked they complied with tax,company and statutory regulations


Depreciation rates are set in line with Companypolicy


Changes to the cost of the asset are reflected insubsequent depreciation charges taking into accountremaining estimated economic life of the asset.


Asset register is regularly reviewed for negative netbook values which are then investigated andresolved.




Verification of assets held in storage and spareslocations


Exception report of assets held at nil net book value Fixed assetaccounting

Documents

Fixed Assets Audit Programme