Auditing fixed asset impairments and disposals involves verifying the accuracy and completeness of fixed asset balances, assessing the need for impairments, and ensuring proper recording of disposals in an organization's financial statements. Fixed assets include property, plant, and equipment (PP&E) held for use in operations, such as buildings, machinery, and vehicles.

Key Audit Procedures:

Review of Fixed Asset Register:

Examination of Asset Details: Auditors review the fixed asset register to identify all fixed assets held by the organization, including their descriptions, acquisition dates, costs, and accumulated depreciation.

Comparison to Physical Assets: Auditors perform physical inspections or observations of selected fixed assets to verify their existence, condition, and location, reconciling the information to the fixed asset register.

Assessment of Impairment Indicators:

Identification of Impairment Indicators: Auditors assess whether there are any indicators of impairment for fixed assets, such as significant declines in market value, technological changes, or adverse changes in business operations.

Testing for Recoverability: Auditors test the recoverability of fixed assets by comparing their carrying values to estimated future cash flows or appraised values to determine if impairments are required.

Evaluation of Disposal Transactions:

Review of Disposal Documentation: Auditors review documentation related to fixed asset disposals, including sale agreements, disposal authorizations, and asset retirement records, to ensure proper authorization and documentation of disposal transactions.

Verification of Proceeds: Auditors verify the proceeds received from fixed asset disposals by comparing sales proceeds to bank statements or other evidence of payment.

Testing of Accounting Treatment:

Assessment of Accounting Treatment: Auditors test the accuracy and appropriateness of accounting treatments for fixed asset impairments and disposals, ensuring compliance with relevant accounting standards (e.g., IFRS, GAAP).

Examination of Disclosures: Auditors review the financial statement disclosures related to fixed asset impairments and disposals to ensure that they provide transparent and relevant information to users of the financial statements.

Objective Question:

Based on the audit procedures for fixed asset impairments and disposals, which audit procedure involves verifying the proceeds received from fixed asset disposals by comparing sales proceeds to bank statements or other evidence of payment?explain.

 

Answer rating: 100% (QA)

The audit procedure that involves verifying the proceeds received from fixed asset disposals b... View the full answer