Presented to:

Prof. Iftikhar Ahmed

Presented by:

Faisal Nadeem

Verification of Assets

Verification

Verification of assets is a process by which the auditors examine

the accuracy of the assets appearing in the balance sheet.

What is a fixed asset?

It is an asset, with a useful life of over one year, owned & used by a project to achieve its stated objectives

Examples are:

Plant and MachineryProperty and equipmentComputerFurnitureVehiclePhotocopier etc…

Fixed Assets Register (FAR)?

► It is a manual or computerized record of fixed assets

► It contains details of assets – make, model, specifications, quantity, rate, value, supplier, receipts, issues, balance, location etc. It also has the date of receipt of the asset & the payment voucher reference.

► Each class of assets will have a separate page in the FAR

► Entry in FAR should be made before payment is released to the supplier

► Any alteration in the FAR must be duly authorized6

Fixed Assets Register

Fixed Assets Issue Register.

⇉ While the FAR is maintained according to class of assets, the FAIR is maintained according to the staff member who holds the asset.

⇉ It will record the date of issue & return of each asset

⇉ It will bear the signatures of the employee when he receives the asset & that of the storekeeper the asset is returned

⇉ The register helps in locating assets at the time of physical inventory taking

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Fixed Assets Issue Register

Physical verification of fixed assets

► Conducted by an inter departmental team

► Should be undertaken under the supervision of external/ internal auditors at least once a year

► Surprise checks during audit/supervision visits

► To verify existence, condition & custody of assets

► Physical balances compared with book balances

► Variances have to be adjusted in financial records after due authorization

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VERIFICATION OF PLANT AND MACHINERY-:

1. Auditor should vouch the purchase of a plant with the receipts and invoices.

2. It should also be checked that all the expenditure on this account is a capital charge.

3. If the plant is erected by the client own name then auditor should check that allocations of plant has been

made correctly.

VERIFICATION OF PLANT AND MACHINERY-:

4. Auditor should check the schedule of the plant and machinery which should be certified by the engineer.

5. Auditor should also do the physical checking of the machinery if possible.

6. Auditor should also verify that sufficient amount of depreciation is provided for this asset or not.

Verification of property and Equipment

• Use of a plant and equipment capital budget• Maintenance of a subsidiary ledger• A system of authorizations• Analysis of variances from budgeted expenditures• Periodic physical inventories• A system of retirement authorization and

documentation

Impairment of Long-Lived Assets

• Long-lived assets must be reviewed for impairment whenever events or changes in circumstances indicate that carrying value may not be recoverable

• Test involves projecting future cash flows• If impairment is indicated by cash flows asset

must be written down to fair value• May require the use of a valuation specialist

Valuation and Disclosure

The auditor should satisfy himself that the fixed assets have been valued

and disclosed in the financial statements according to the generally accepted

bases of accounting which are determined by law

Audit of Intangibles

• Assets with definite useful lives are audited similar to property, plant and equipment

• Assets with indefinite useful lives (e.g., goodwill) must be tested for impairment

• Auditors generally rely on business valuation specialists to value goodwill for tests of impairment

VERIFICATION OF PATENTS

A patent is an official document which secures to an investor the exclusive right to make use or sell his invention.A. The auditor should check the patent register in order to verify that it has been properly included therein.B. The auditor should also ensure that the legal life of the patent has not yet been expired.C. The latest renewal certificate of the patent should also be verified by the auditor.

Auditor should verify the trademark with the help of relevant documents. He should examine the schedules and check that all these are certified by the responsible officer or not. If any agreements made it should also be checked by the auditor. Auditor should also check that renewal fees have been charged or not.

VERIFICATION OF TRADEMARKS

Copyright

A copyright is the exclusive legal right to produce and reproduce

some kind of literary work.

Auditor’s duty regarding verification

The auditor should see that the value of copyright is determined on properly basis including the period of copyrights.It should be confirmed that the legal life of copyright has not been expired.It should be seen that the copyright having no commercial value has been written off.The auditor should ask the schedule from the client and examine thereof.