Fixed assets audit

What the auditor tests

• Physical existence of assets — sample inspection and stock-count data
• How the initial cost was formed, including the costs of bringing the asset to working condition
• Correct calculation of depreciation and whether useful lives are justified
• Distinguishing repairs from upgrades — a typical source of errors
• Documentation of disposals and the gain or loss on them
• Encumbrances and pledges

Why the stock count is critical

Without stock-count documents the auditor has no evidence that the assets actually exist. Even if everything is physically in place, the lack of confirmation leads to a qualification on this line item — and fixed assets usually make up a material part of the balance sheet.

Requirements of NAS No. 5 (from 1 January 2025)

• recognition at initial cost: the purchase price and all costs of bringing the asset to working condition (subparas. 11, 13);
• measurement model — cost or revalued amount, fixed in the accounting policy; revaluation applies to all classes (subparas. 12, 29);
• depreciation — straight-line, units-of-production or accelerated (subparas. 39–40), monthly at 1/12 of the annual amount (para. 43);
• upgrades and reconstruction increase the carrying amount; other costs are expenses of the period (subparas. 24–25).

Audit procedures

• observing the stock count and inspecting a sample of assets — the auditor is entitled to verify the physical existence of property (Article 28 of Law No. ZRU-677);
• checking additions and disposals against documents, and commissioning;
• recalculating accounting depreciation and reconciling it with tax depreciation: for tax purposes — the straight-line method at the maximum rates of Article 306 of the Tax Code;
• analysing repairs: whether upgrades have been capitalised and routine repairs have not.