An audit is an examination conducted by independent experts. During the events, they study the financial condition of the company, the quality of reporting, the correctness of accounting. One of the important aspects of the audit is the audit of accounting for transactions with fixed assets. It should be carried out regularly, inviting external experts or organizing an internal commission, guaranteeing independence, lack of pressure and conflict of interests.
Relevance of the audit
Initially, an audit of operations related to the movement of fixed assets appeared in joint-stock European companies amid the fact that company managers, investors, and owners sought to find a balance of interests. The development of audit practice is provoked by:
- the desire to defend their interests, especially relevant against the background of the fact that the management group could provide false, incorrect data on the activities of the enterprise for its own benefit;
- the dependence of decisions and consequences on how reliable information is manipulated by those on whom decisions depend;
- the lack of comprehensive information about the state of the enterprise and the ability to evaluate its quality for each individual person.
As a rule, the audit of operations with fixed assets and non-current assets is entrusted to outside workers invited to the enterprise only for the sake of verification. They not only study the documentation, reporting, practices in place at the enterprise, which makes it possible to identify errors, shortcomings, and violations of laws, but also formulate recommendations that in the future will help improve the quality of the company and its financial effectiveness.
OS audit: features of the methodology
Audit of operations on receipt of fixed assets and others associated with them, usually involves the preliminary development of a verification program, an action plan. The study of the OS is only one of the stages of a complex analysis of the subject.
To identify the safety of the OS, the presence of those will have to analyze:
- the availability of protocols that regulate the cost;
- quality of contracts related to the acquisition and sale of fixed assets.
Modern accounting practices suggest taking into account the operating system only when the operations involved in them are carried out, and systematic accounting for the operating system is not carried out. Depreciation indicators depend on this, the need to include fixed assets in production costs, as well as due to circulation.
Audit of operations for the disposal of fixed assets is a difficult task, as well as issues of confirmation of information related to business transactions. This is due to the location of the information: data will have to be extracted from internal, external official papers, which turns the event into a large-scale procedure. Audit of operations with fixed assets (transactions: Accounts Dt 08.4, 19.1, 60, Accounts Ct 50-1, 51, 55, 60, 71) is carried out by studying contracts, agreements, invoices, acts drawn up by tax inspectors. Based on these data, the inspector forms an idea about the object, from which he can draw certain conclusions.
OS movement
Typically, OSs appear in a company as follows:
- purchased for a certain amount;
- come at no cost;
- sent to the authorized capital as contributions of the founders;
- in the presence of leased fixed assets and their redemption are in the possession of the enterprise;
- in the presence of joint activities fixed under the contract, they are returned to the enterprise.
For each receipt transaction, you need to draw up the appropriate document - an act or OS-1 invoice. Additionally make technical documents, applying them to the consignment note. Audit of operations with fixed assets and intangible assets involves the control of the correctness of securities associated with the receipt of fixed assets of all of the above types.
Disposal and liquidation
OS may retire for the following reasons:
- liquidation of the facility due to wear and tear, dilapidated condition, force majeure;
- liquidation provoked by updating the work process or replacing equipment;
- transfer to another company.
To determine that some operating systems need to be eliminated, since they are unsuitable for further use, you will have to create a special commission. This one evaluates the OS, on the basis of which it writes off the write-off. This operation should be documented by a special act in the form of OS-3. Audit of operations with fixed assets and intangible assets always involves the control of securities regulating the liquidation, transfer of fixed assets. The document is sent to the director of the organization for approval, and only at the end of the paper procedure they begin to directly liquidate.
Audit: what can be identified
The classical audit of operations with fixed assets, using the example of an organization operating in the conditions of modern document management and economic realities, usually reflects problems associated with the fact that operating systems are incorrectly reflected in reports.
The auditor pays particular attention to:
- exchange rates at the time of transactions with the OS;
- capitalization, write-off of fixed assets and the reflection of these operations in the documentation of the enterprise.
Long-term audit practice in our country has revealed that very often enterprises do not conduct documentation of operations related to fixed assets. If this is done, then many entrepreneurs do it sloppy, incompletely, without making all the necessary details. Such neglect of the rules of paperwork leads to an incorrect calculation of depreciation charges. If you have to organize a major overhaul, then the cost price is calculated incorrectly, contrary to the laws in force, since they incorrectly classify those costs that should be attributed to capital.
Information - as intended!
When carrying out activities that make up the audit of operations with fixed assets, the auditor, if errors are found, brings the data about them to the leaders of the company. The specialist recommends ways to solve the problem, suggests which corrections should be made. As a rule, report forms and registers are adjusted.
If problems are found in the aspects of depreciation, then the auditor calculates how large the excess depreciation is, whether there has been an underestimation. They analyze the impact of these errors on the cost of goods produced, on the financial results shown by the enterprise. The data is used to identify the perpetrators, to find the reasons for what happened. Take measures to prevent a recurrence of the situation.
Audit objectives
The audit of taxation of operations with fixed assets, the actions themselves is aimed at the formation of reasonable conclusions: how much the financial statements in the company correspond to the real state of things in practice. The completeness of the information is important not only for the shareholders of the enterprise, but also for potential investors planning to send their money to the company. An audit allows you to conclude whether to trust this company.
Auditors analyze:
- expenses caused by repairs;
- profit from transfer under a lease;
- rental expenses;
- expenses and profits associated with disposal of fixed assets;
- unfinished capital construction;
- tax liabilities.
Audit: Theory
Audit of operations with fixed assets is carried out in the following stages:
- Setting goals.
- Develop a plan.
- Creation of an audit program.
- Development of a conclusion.
- Preparation of recommendations.
In order for the events to be effective, the audit of operations with fixed assets includes:
- Specific verification methods.
- Assessments to identify the specific control system in the company.
- Essential programs tailored to the specifics of a particular enterprise.
Focusing on internal control
The first thing you need to pay attention to when conducting an audit of operations with fixed assets is the system of control over its work that has been introduced inside the company. Only then will the measures be effective, taking into account intangible assets, fixed assets, when they begin with an assessment of the effectiveness of regulatory bodies in the enterprise. During the audit, analysts determine whether the controlling system meets the requirements and gives the expected results. It is also revealed how it can be upgraded to increase efficiency.
An audit of a control system is a test that results in an assessment of the health of the implemented methods. At the same time, the environment to be controlled is taken into account, the attitude of the management team to the monitoring system, and whether optimal working conditions are created. Be sure to analyze the subject of accounting, funds used for control.
Correct assessment is the key to success
When an audit of operations with fixed assets is carried out, the correct assessment of the control system implemented in the company is carried out through the following activities by the auditor:
- Monitoring the availability of administrative documentation, its validity. Papers should formally regulate how to account for transactions, keep documents connected with the OS, their movement, disposal, and also with intangible assets.
- Expert assessment of the official registration of the company's business activities, involving the analysis of schedules, documentation circulation schemes at the enterprise.
- Analysis of accounting forms and their compliance with the company.
- Monitoring the availability of registers necessary for the correct payment of taxes and accounting.
- Analysis of the procedure for working with financial statements within the organization.
During the audit, the auditor will have to summarize as much as possible data on operations for the studied period, their scale and prevailing nature.
Testing as an assessment of reliability
To verify that accounting of the OS is done correctly, you can resort to testing. Certain tests are arranged in blocks according to similar parameters. This simplifies enterprise testing and processing of information received.
The stage of planning an audit usually involves the formation of such a program in which all the parameters of the enterprise (economic, legal), sources of evidence for the auditor are mentioned. It also lists the valid procedures for the auditor and tests that he can use in his work.
A full description of the company will necessarily contain data on the technical equipment of the enterprise and its legal status, on how large the volumes of work are, where the company is located, what trade relations it has established.
Audit procedures
An audit often includes the following checks, evaluations:
- OS safety;
- the presence of the OS;
- compliance with the conditions for classifying certain assets as fixed assets, intangible assets;
- workflow;
- replacement, initial cost;
- depreciation, the legality of its accrual and the correctness of calculations;
- operations involving OS (leasing).
The data obtained during these procedures are summarized, analyzed, and conclusions are drawn based on them.
Data sources
For audit verification to be accurate and efficient, specialists must have full access to all the information they need. Typically, auditors are given unlimited access to:
- constituent documentation;
- accounting policies;
- accounting registers;
- primary documentation;
- accounting reports;
- regulatory documentation governing taxation, accounting in OS accounting.
Studying documents, information is collected, given the combination of all operations with the OS in the following groups for ease of analysis:
- receipt;
- exploitation;
- retirement.
Without accurate data - nowhere
In order for the auditor to make a qualitative analysis, he must know the following parameters regarding a specific organization:
- a list of objects that are considered OS at the enterprise;
- price limit for objects eligible for classification as fixed assets;
- depreciation calculation methods;
- methods of reflection of expenses related to OS repair;
- Is it possible in the company to overestimate fixed assets on the first day of the next reporting year?
- in what periods of the OS are inventory;
- which accounts, sub-accounts are used in accounting for fixed assets.
Safety control
An audit always includes the steps of controlling the availability of the OS, how well they are preserved. This is necessary for accounting reporting to be confirmed.
The task of the auditor is to verify the fact that there are no such objects among the OS which cost less than the documented limits. In addition, the check reveals the presence among the OS of those objects that serve less than a year. The auditor finds transfer operations between the operating system and low-value items that wear out over a short period of time. Controlled as transfers in the direction of the OS, and in the opposite direction. The inspector will have to pay attention to this question: the cost is estimated at the moment when the object was received or put into use.
Practice shows that translation operations between the OS and objects with low value and rapid wear and tear cause a lot of problems and are fraught with numerous errors. As a rule, companies try to increase costs, conditional on their additional depreciation, and for this they introduce these frauds that are contrary to the norms.