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    Audit of Fixed Assets

    What is Fixed Assets?

    FixedAssets are defined as the Assets held with the intention of being used for the purpose of producing orproviding goods or services and is not held for sale in the normal course of business. 

    Whichare expected to be used for moret han 1 accounting period. Some of the Examples are: 

    • Buildings o Furniture 

    o Machinery & Equipment o Computer 

    o  Vehicles. 

    Audit Objective: 

    Toensure Proper records relating to Fixed Assets are being maintained vToensure that only capital Expenses are being capitalized 

    ToValidate the correctness, accuracy and completeness of depreciation calculated and compliance of schedule II of Companies Act, 2013. 

    Compliance of relevant Accounting Standards/IND AS applicable. vCompliance of disclosure requirements as per schedule III of Companies Act,2013


    Audit Procedure: 

    Documents/information to be obtained from client: 

    • Details of internal Policies regarding Fixed Assets and depreciation. o Fixed asset register maintained by the client. 

    o  Details of Fixed Assets budgets. 

    o Copies of supporting documents like purchase requisitions, Request for quotations, Quotations, comparative statements, POs, Invoices etc for the samples selected. 

    o Obtain the list of authorized people who can authorize the purchase/disposal of fixed Assets at different stages of purchase/disposal process. 

    o  Physical verification register of Fixed Assets maintained by the client. 

    Processof Verification: 

    • Examine the internal policies of the client and analyse if they are in line with the statutory requirements. 
    • Verify whether all the opening balances reflected in Financials and FAR are same as the closing balances as per previous year audited Financials. 
    • Verify the FAR for its completeness and accuracy and its compliance with Companies Act 2013.(CARO 2016 requirements) 

    o    In case if the assets are revalued, ensure that entire class of such assets are revalued 

    • Ensure revaluation increase/decrease is adjusted against revaluation reserve/profit & loss a/c. o Conduct physical verification of fixed Assets to ensure the following: 

    Physical existence of the Asset. 

    Fixed Assets are properly labelled with the respective Asset number for identification. Ensure that assets are in working condition.

    Details regarding quantity of fixed Assets are properly captured in FAR. nThere prevail proper controls to restrict unauthorised access to Fixed assets. nPhysical verification of fixed Assets is done at regular intervals by the management. 


    o    Ensure compliance with internal policies for acquisitions.

    o    Ensure that Actual expenditure incurred is within the estimated budget. 

    o   Check the entire process of purchase of fixed Assets for the samples selected with the Documentary evidencesavailable for such purchase. 

    • Compliance of AS 10(Revised),AS 26,AS 16 and AS 12 while accounting the fixed asset in books of accounts. 


    o    Compliance of internal policies for disposal of assets. 

    o   In case if any substantial part of fixed asset is disposed off ensure that it doesn’t effect the going concern status of the enterprise. 

    o   Ensure that any profit/loss arising from such disposal is correctly calculated and recorded in the books. 

    o    Depreciation on such assets disposed off are adjusted accordingly. 

    • Fixed assets which are retired from active use and held for sale Should be recorded at lower of net book value & net realisable value 


    o    Depreciation is the measure of wearing out, Consumption and other loss in the value of the depreciable asset arising from the use, effluxion of time or obsolescence through technology or market changes. 

    • Ensure compliance of AS 10(Revised),AS 26 for calculating depreciation. o Depreciation for acquisitions are calculated on pro-rata basis.

    o  Ensure the compliance of Schedule II of companies act 2013 while calculating depreciation. 

    o In case of any deviation from schedule II requirements, the same has to be disclosed in notes to accounts. 

    Disclosure requirements: 

    o   Ensure that Fixed assets are classified under the classifications mentioned in schedule III of companies act 2013. 

    • As per Schedule III of companies act 2013 the following details regarding fixed assets are to be disclosed in notes to accounts:

    Grossvalue of each class of fixed Assets at the beginning and end of the reporting period. nUsefullife of the fixed asset 

    Accumulated depreciation of such class till date nDepreciation charge during the year 

    Detailsof acquisitions and disposals during the year if any nDepreciation relating to such acquisition/disposal separately. 

    Netblock of each class of fixed assets at the beginning and end of the reporting period 

    Depreciation method followed for charging depreciation and details of change in method if any during the year 

    • Deviation from schedule II of companies act 2013 has to be disclosed as a part of notes to accounts 
    • In case of revaluation, particulars of assets revalued, amount of such revaluation shall be shown for a period of 5years from the date of revaluation by way of a note in financials 

    o    Change in accounting policy if any 

    In case if any intangible asset is amortised for a period exceeding 10years, the reasons and factors for determining the asset’s useful life beyond 10years has to be disclosed in Financial statements.