what type of audit evidence would most likely be used to verify the existence of fixed assets?
physical examination
Well, if we were to get serious for a moment, the most commonly used audit evidence to verify the existence of fixed assets would be physical inspection. Yes, that means actually going out and looking at those assets with your own two eyes. But, you know, maybe try not to get too attached to any particularly fancy staplers you find along the way. They have a way of disappearing when you're not looking. Trust me.
To verify the existence of fixed assets, several types of audit evidence can be used. These include:
1. Physical inspection: The auditor can physically examine the fixed assets to ensure their existence. This may involve counting and inspecting the assets to compare them with the company's records.
2. Documentation review: The auditor may review documentation related to the fixed assets, such as purchase invoices, agreements, lease contracts, and title deeds. This helps confirm the ownership and existence of the assets.
3. Confirmation from third parties: The auditor may contact third parties, such as suppliers or lessors, to confirm the existence and ownership of fixed assets. This can be done through written or electronic confirmations.
4. Asset tagging or marking: Some organizations tag or mark their fixed assets with unique identifiers or barcodes. The auditor can verify the existence of assets by matching these tags or markings with the company's records.
5. Reconciliation of asset register: The auditor can reconcile the company's fixed asset register with other supporting documents, such as maintenance records, insurance policies, or disposal records. Any discrepancies would require further investigation.
6. Inquiry and observation: The auditor may inquire about the assets with personnel responsible for their custody or observe their usage during site visits. This helps to gather additional evidence regarding the existence of fixed assets.
It is important for auditors to use a combination of these audit procedures to obtain sufficient and appropriate evidence for verifying the existence of fixed assets. The specific procedures chosen will depend on the nature of the assets, the controls in place, and the auditor's professional judgment.
To verify the existence of fixed assets, auditors typically rely on a combination of audit evidence, which includes:
1. Physical Inspection: The auditor physically examines the fixed assets, such as buildings, land, machinery, and equipment, to ensure their existence. This involves reviewing asset tags or labels, serial numbers, and conducting site visits to observe and document the physical presence of the assets.
2. Documentation and Records: The auditor reviews documents and records related to fixed assets to confirm their existence. This includes examining purchase orders, invoices, contracts, lease agreements, maintenance records, and asset registers. These documents provide evidence of the acquisition, ownership, and maintenance of fixed assets.
3. Confirmation of Ownership: The auditor may send confirmation letters or emails to third parties, such as the asset suppliers or lessors, to verify ownership and the existence of significant fixed assets. The third parties are requested to confirm the details, including the cost, description, and location of the assets.
4. Digital and Electronic Evidence: With the increasing use of technology, auditors may also rely on digital or electronic evidence to validate the existence of fixed assets. This may include reviewing electronic databases, asset management systems, or using specialized software to track and reconcile asset records.
5. Reconciliation: The auditor reconciles the fixed asset records with other financial information, such as the general ledger, depreciation schedules, insurance policies, and tax records. Any discrepancies or gaps in the recorded assets are investigated and resolved.
It is important to note that the selection and combination of audit evidence may vary depending on the specific circumstances, the materiality of the assets, and the auditor's professional judgment.