Fixed assets are an important part of any organization’s balance sheet. As per the Companies Act, 2013, fixed assets are defined as assets held for use in the production or supply of goods or services, for rental to others, or for administrative purposes, and are expected to be used for more than one accounting period.
As an experienced CA firm in India, Ahuja & Ahuja Chartered Accountants recognizes the importance of fixed assets for our clients’ organizations. We have been providing high-quality services to clients pan India for over two decades from our offices in Delhi, Noida, Gurgaon, and Greater Noida.
At Ahuja & Ahuja, our team of experienced and expert professionals, including CAs, CS, and Lawyers, possesses the knowledge and skills required to deliver outstanding results to our clients. We provide comprehensive Fixed Assets Audit services to ensure that your organization’s fixed assets are being properly recorded and maintained.
Fixed Assets Audit Services Benefits:
- Accurate Asset Records: Fixed Assets Audit Services help organisations to accurately record and maintain financial and non-financial information pertaining to each asset. This ensures that the asset records are updated and correct, which is crucial for taxation and overall financial statistics.
- Prevention of Theft and Unauthorised Access: Fixed Assets Audit Services help organisations to secure their assets from theft and unauthorised access. This is achieved by identifying any potential security gaps in the asset management system and implementing measures to prevent such incidents.
- Identification of Obsolete or Underutilized Assets: Fixed Assets Audit Services help organisations to identify assets that are obsolete or underutilized. This enables the organisation to dispose of such assets or reallocate them to more productive use, which can result in cost savings and increased efficiency.
- Compliance with Legal Requirements: Fixed Assets Audit Services help organisations to comply with legal requirements related to asset management. This includes ensuring that assets are classified under the classifications mentioned in the applicable laws and that all required disclosures are made in the financial statements.
- Improved Asset Management Processes: Fixed Assets Audit Services help organisations to improve their asset management processes. This is achieved by identifying any weaknesses or inefficiencies in the current processes and recommending improvements to streamline and automate the asset management process.
- Use of Technology: Fixed Assets Audit Services can utilise technology, such as barcode scanners, to increase asset accuracy, data integrity, and accountability. This leads to faster asset data collection, reduced errors, and simplified record-keeping, which can save time and resources.
Our Fixed Assets Audit Objectives
- To ensure that proper records relating to fixed assets are being maintained.
- To ensure that only capital expenses are being capitalized.
- To validate the correctness, accuracy, and completeness of depreciation calculated.
- To ensure compliance with relevant accounting standards and disclosure requirements as per the Companies Act, 2013.
Our Fixed Assets Audit Deliverables
- A detailed report highlighting the audit findings and recommendations for improvement.
- A list of fixed assets identified during physical verification.
- Identification of assets that are obsolete, damaged, or no longer in use.
- Recommendations for improving the Fixed Asset Register (FAR) and internal controls relating to fixed assets.
Process of Verification:
Our Fixed Assets Audit Services will conduct the following verification process:
- Examine the internal policies of the client and analyze whether they are in line with statutory requirements or not.
- Verify whether the opening balances being reflected in Financials and Fixed Asset Register are the same as the closing balances as per last year audited Financials.
- Verify the Fixed Asset Register for its completeness, correctness, and accuracy and its compliance in accordance with the Companies Act, 2013.
- Ensure that assets are in working condition.
- Conduct the physical verification of fixed assets to ensure their physical existence, appropriate labeling, and adequate capturing of details in the Fixed Asset Register.
- Ensure relevant fixed assets auditing procedures are followed in accordance with relevant laws and regulations.
Documents required from the client
- Details of internal policies and guidelines regarding fixed assets and their depreciation.
- Fixed Asset Register maintained by the client.
- Copies of supporting documents/vouchers like purchase requisitions, request for quotations, quotations, comparative statements, POs, invoices, etc. for the samples selected.
- List of authorized people who can approve the purchase/disposal of fixed assets at different stages of the purchase or disposal processes.
- Physical verification register of the fixed assets maintained by the client.
Our Fixed Assets Audit Services will ensure compliance with internal policies for acquisitions and that actual expenses incurred are within estimated/expected budgets. We will check the entire process of procurement/purchase of fixed assets for the samples selected with the documentary shreds of evidence available for such purchase. We will ensure compliance of relevant accounting standards while accounting for fixed assets in books of accounts.
Our Fixed Assets Audit Services will ensure compliance with internal policies for the disposal of assets. In case of any substantial part of a fixed asset is disposed of, we will ensure that it does not affect the going concern concept of the business. We will ensure that any profit/loss arising from such disposal is correctly calculated and recorded in the books. Depreciation on such assets disposed of will be adjusted, and fixed assets held for sale will be recorded/noted at lower of Net Book Value and Net Realizable Value.
Depreciation is the measure of reduction in value, wearing out, and such other losses in the value of the depreciable fixed asset arising from use, wear and tear, effluxion of time, or obsolescence through technology or market changes. Our Fixed Assets Audit Services will ensure compliance with relevant accounting standards and schedule II of Companies Act, 2013, while calculating depreciation. In case of any deviation from Schedule II requirements, we will disclose the same in notes to accounts.
Disclosure Requirements Audit
We will ensure that your organization’s fixed assets are classified according to the classifications listed in Schedule III of the Companies Act, 2013. Our team will review and verify the information disclosed regarding fixed assets in the notes to accounts, including the gross value of each class of fixed assets at the beginning and end of the reporting period, accumulated depreciation, depreciation charge during the year, details of acquisitions and disposals, and net block of each class of fixed assets.
We will also ensure that any deviation from the Companies Act, 2013 Schedule II is properly disclosed and that particulars of any revaluation of assets are disclosed for a period of 5 years from the date of revaluation. Additionally, we will review any changes in accounting policy related to fixed assets, such as the amortization of intangible assets for a period exceeding 10 years.
Frequently Asked Questions about Fixed Assets Audit
Why is Fixed Assets Audit important for my business?
Fixed Assets are essential resources for any business, and their proper management is crucial for effective financial management. A Fixed Assets Audit helps to ensure that asset records are accurate and up-to-date, and helps to identify any discrepancies or potential issues. This can help to prevent financial loss, theft or unauthorised access to assets, and can also provide valuable information for taxation and overall financial statistics.
Who needs to conduct a Fixed Assets Audit?
While Fixed Assets Audit is not required by law, every organisation should consider conducting one at least once a year. This is especially important for businesses that rely heavily on fixed assets, such as land, buildings, machinery, and equipment. A Fixed Assets Audit can help to ensure that all records are accurate, up-to-date, and easily accessible, which is essential for effective financial management.
Do I need to conduct a Fixed Assets Audit if I’ve already performed a Stock Audit?
While a Stock Audit focuses on physical verification of inventory held in a storehouse, a Fixed Assets Audit is focused on long-term assets such as land, buildings, machinery, and equipment. Therefore, it is recommended to conduct a Fixed Assets Audit even if a Stock Audit has already been performed.
Is Fixed Assets Audit mandatory under any statute?
No, Fixed Assets Audit is not mandatory under any statute. However, it is highly recommended to ensure proper management and protection of fixed assets.
What is a Fixed Assets register?
A Fixed Assets register is a detailed list of all fixed assets owned by a business. It provides an accurate record of each asset, including its financial and non-financial information. It helps to easily identify and verify assets when required, and assists in effective financial management.
How can using barcode scanners benefit Fixed Assets Audit?
Using barcode scanners for Fixed Assets Audit can deliver numerous benefits, including increased asset accuracy, faster asset data collection, reduced errors, and simplified record-keeping. Barcode asset tracking captures vast amounts of information about each asset, increases data integrity, accountability, and provides immediate access to the location of each asset. Additionally, it eliminates missed maintenance schedules, ensuring that assets are properly maintained and protected.