QUESTION 2 C

Ouline atleast five important audit objectives in the the audit of fixed assets additions and discuss
audit procedures to achieve the identified objectives.

Audit Objectives

1. Existence.

The auditor has to satisfy himself/herself on whether or not the fixed assets additions in the
current year is valid and actually did take place and the acquired assets actually exist under
ownership and control of the clients company.

Audit procedure.

-Examination of documents such as fixed asset register and BoD minute to verify on the
existence of the fixed asset.

-Physical confirmations at the location of the added fixed asset to verify on whether or not the
acquired assets do exist in the physical form

2. Accuracy

The additions of fixed assets should be recorded in the right amount through out all the
documents. It can be traced from the board minutes as the agreed purchase price from the lowest
bidder up to the balance sheet amount recorded at the year end.

Audit procedure.

- The auditor should verify the purchase amount of the fixed asset starting from the agreed
price amount in the BoD minutes, the invoices and vouchers, general journal and ledgers
and finally the balance sheet amount.
- The auditor may also confirm with the seller of the fixed asset to know if the price
amount recorded is accurate and all additional costs can be recomputed to get the final
cost of the asset by the auditor and then comparisons can be made.
3. Completeness

The auditor has to verify that the acquisition of fixed assets has been recorded and disclosed in
all books of accounts as per financial recording framework by tracing it from source document
to the final balance sheet as at year end.

Audit procedures.

Auditors should examine documents such as BoD minutes, fixed asset register and general
journal and ledger up to the balance sheet to verify that the fixed asset addition transactions have
been recorded through out the books of accounts and disclosed according to the reporting frame
work.

4. Cut off

There should be due care in recording the additions of fixed assets considering the cut off date.
Only the assets acquisitions that are before the cut off limit have to be included in the balance
sheet and those of subsequent period should may or may not be considered for adjustment.

Audit procedure.

- The auditor should determine the cut off date and time and the fixed assets subsequent
period should be identified acquired during the
- Inquire the management about any fixed asset acquired subsequent to the accounting
period especially those whose recording is incomplete.
- Check on the BoD minutes on any approved subsequent acquisition of the fixed asset.
- Adjust the subsequent acquisition of fixed assets or provide footnotes on the acquisition
as an important other matter to be disclosed in the audit report.

5. Right and obligations

The auditors should be assured that the client rightfully owns all the fixed assets disclosed. Fixed
assets acquired but attached as collateral should be identified and those whose legal registration
is not complete should be identified and followed upon to know whether they have been paid for
or still on credit.
Audit Procedures.

- Examine the documents such as fixed asset register and the BoD minutes to get assurance
on the possession of the added fixed asset by the clients company.
- Inquire with the management on any fixed assets acquired that that have not completed
registration and any fixed assets that have been acquired but again used as collateral for
loans
- Confirm with the companies legal department to know about the legal status of the
acquired fixed asset.
- Confirm with the companies lawyers on the company acquired asset legal status to know
if its rightfully owned by the client or not.