Fixed assets audit tests the complete asset trail: capex request, purchase, receipt, installation, ready-for-use date, capitalisation, CWIP, FAR, physical verification, depreciation, disposal, impairment, insurance and system access.
Risk: Assets are purchased without approved budget, business case, technical need or delegated authority.
Capex budget, approval note, business case, board/committee minutes, purchase request and delegation matrix.
Risk: Asset invoices are paid or capitalised before receipt, installation, commissioning or readiness for use.
PO, invoice, GRN, delivery challan, installation report, commissioning certificate and user acceptance.
Risk: Revenue expenditure is capitalised, capital expenditure is expensed, or componentisation criteria are ignored.
Capitalisation policy, invoice narration, technical note, fixed asset voucher, approval checklist and GL entry.
Risk: Completed assets remain in CWIP, abandoned projects are not reviewed, or depreciation starts late.
CWIP ledger, project tracker, completion certificate, project-owner confirmation, FAR transfer and depreciation run.
Risk: FAR is incomplete, duplicated, not reconciled to GL, or lacks asset ID, location, custodian and useful-life fields.
FAR extract, GL control account, reconciliation, asset-class map, change log and reviewer sign-off.
Risk: Assets are missing, moved, damaged or held by the wrong custodian without detection.
Physical verification plan, count sheet, asset tags, photographs, custodian confirmation and variance tracker.
Risk: Depreciation is calculated using wrong useful life, residual value, method, start date or shift adjustment.
Depreciation policy, Schedule II/technical note, FAR depreciation fields, depreciation run and reviewer approval.
Risk: Assets are sold, scrapped, retired or written off without approval, valuation, receipt tracking or FAR removal.
Disposal note, valuation, sale invoice, scrap register, gate pass, bank receipt, GST support and FAR entry.
Risk: Idle, damaged, obsolete or uninsured assets remain at carrying value without impairment or risk review.
Idle asset list, utilisation report, impairment memo, insurance schedule, claim tracker and management action plan.
Risk: Users can create assets, change useful lives, post disposals, backdate capitalisation or approve their own changes.
ERP user list, FA role matrix, asset master change log, audit trail, HR leaver list and access review sign-off.
CWIP item remains open beyond threshold without project status, completion date or impairment review.
Asset capitalised before installation, commissioning or ready-for-use evidence.
Asset-class balance in FAR does not reconcile to GL control account.
Active FAR item has blank location, custodian, tag number or asset class.
Asset is fully depreciated but still active, with no useful-life reassessment.
Asset marked sold/scrapped/retired but remains active in FAR or depreciation run.
Exited employee remains active in fixed asset creation, approval, disposal or depreciation role.
Use ICAI Standards on Internal Audit for planning, evidence, documentation and reporting. For accounting tests, record whether AS 10 or Ind AS 16 applies. For companies, also document Schedule II useful-life and residual-value assessment and any technical support for deviations.
Fixed assets internal audit reviews whether capex approval, asset receipt, capitalisation, CWIP, FAR, tagging, physical verification, depreciation, disposal, impairment, insurance and ERP access controls are designed, evidenced and operating.
Full-population tests are useful for old CWIP, blank FAR fields, FAR-to-GL mismatch, capitalisation before ready-for-use date, fully depreciated active assets, disposals still in FAR and leaver access to the FA module.
Use the entity-specific criteria. Companies usually consider Companies Act Schedule II for useful-life and residual-value expectations, while accounting recognition and measurement depend on whether AS 10 or Ind AS 16 applies.
No. Physical verification supports existence and safeguarding, but internal audit should also test capex approval, capitalisation, CWIP ageing, FAR completeness, depreciation, disposal, impairment, insurance and ERP access.
