Fixed assets can represent a significant part of a company’s financial position, especially for businesses with property, equipment, vehicles, machinery or other long-term assets. During an audit, the auditor may need to understand whether significant assets exist, are properly recorded and have been treated appropriately in the financial statements.
What Is a Fixed Asset Audit?
A fixed asset review within an audit involves procedures designed to obtain evidence about the company’s long-term assets. Depending on the engagement, this can include checking additions, disposals, depreciation, supporting invoices and the asset register.
What Documents Should a Business Prepare?
The business should maintain calculations and supporting information for depreciation or other relevant accounting treatment. For a practical guide to the records auditors commonly request, see Audit Documents UAE.
Fixed Asset Register
Keep an up-to-date list of assets showing relevant details such as description, acquisition date, cost, depreciation and carrying amount, as applicable.
Purchase Invoices
Invoices and supporting documents help establish the acquisition and cost of significant assets.
Disposal Records
If an asset was sold, scrapped or otherwise disposed of, keep the relevant approval, sale document or disposal evidence.
Depreciation Schedule
The business should maintain calculations and supporting information for depreciation or other relevant accounting treatment.
What Do Auditors Check?
The auditor may seek evidence that significant assets recorded in the accounts actually exist.
Relevant documents may be reviewed to support the company’s rights or ownership over an asset.
New assets may be tested back to invoices, payment records, contracts or other evidence.
Disposed assets should be removed from the appropriate records and supported by the relevant documentation.
The auditor may review whether the accounting records and calculations are consistent with the applicable accounting treatment and company policy.
Common Fixed Asset Problems
Common issues include assets that were purchased but never added to the register, assets still appearing after disposal, missing invoices, duplicate records, incorrect useful-life assumptions, depreciation calculation errors and differences between physical assets and accounting records.
How Can a Business Prepare Before the Audit?
Reconcile the asset register to the general ledger, identify additions and disposals during the year, check significant assets and organize supporting documents. If an asset cannot be located, management should investigate the reason before the audit begins. Reconcile the asset register to the general ledger, identify additions and disposals during the year, check significant assets and organize supporting documents. If an asset cannot be located, management should investigate the reason before the audit begins. Businesses can also use the UAE Company Audit Checklist to identify missing records and prepare key documents before the audit.
Fixed Assets and Financial Statements
Errors in fixed asset records can affect asset balances, depreciation and profit. A clean asset register therefore helps both management reporting and the audit process.
Final Takeaway
A fixed asset audit focuses on evidence supporting the existence, ownership, movement and accounting treatment of significant assets. Keeping the asset register current and supporting additions, disposals and depreciation can reduce avoidable audit questions. For companies requiring an independent financial statement engagement, see External Audit Services in Dubai. For wider audit support, see Audit Services in Dubai.
