Department of Internal Audit and Compliance

Finance and Accounting - Fixed Assets

Effectiveness and efficiency of operations 

A. Capital expenditure requests are approved properly.

  1. Does management at an appropriate level approve pre-numbered capital expenditure forms and forward forms for internally constructed assets to an internal engineering group and those for external purchases to the purchasing department?

B. Duties are segregated adequately.

  1. Is segregation of duties maintained between the following functions: 1. approval of asset acquisitions; 2. approval of asset disposal; 3. fixed asset custody; 4. supervision of fixed asset physical counts and related adjustments; 5. accounting and maintenance of fixed asset records; and 6. general ledger functions? 

Reliability of financial reporting 

A. Fixed asset acquisitions are input accurately and in the proper period.

  1. Are internal and external supporting documents such as invoices compared with the fixed asset sub-ledger in a one-to-one check of new assets? Are discrepancies researched, corrected data reentered, and rechecked against supporting documents?
  2. In systems that input additions into a temporary file before sub-ledger updates, are batch totals used before processing is complete? Are input documents separated into groups and numerical totals calculated in categories such as the quantity of documents, dollar amount, and hash items? Are these totals compared with reports following inputs and updates, all out-of-balance conditions researched, and corrected data reentered in a timely manner?

B. Interests that can be capitalized on financed capital projects are recorded completely and accurately.

  1. Is the financing department required to generate a report on debt used to finance acquisitions? Is management required to reconcile this report to the interest capitalized and then to research any discrepancies, correct inaccurate information, and reenter corrected data?

C. Are payroll costs able to be capitalized for services rendered for construction purposes are recorded completely and accurately.

  1. Is the engineering department required to provide a report on employee involvement in capital projects, and management required to reconcile the report to the personnel costs capitalized, and then research, correct, and reenter any discrepancies?

D. Construction-in-progress data is input accurately and in the proper period.

  1. Are the project status report and the construction-in-process sub-ledger compared in a one-for-one check for accuracy?  Are any discrepancies researched, corrected, and reentered? Is the same check performed for reentered data?

E. Fixed assets are valued properly.

  1. Are periodic physical inspections of fixed assets and construction-in-progress compared with manually entered or system-recorded data?  Are discrepancies researched, inaccuracies corrected, and data reentered in a timely manner?

F. All disposals are input for processing completely and accurately.

  1. In systems that input disposals are into a temporary file before sub-ledger updates, are batch totals used before processing is complete? Are input documents separated into groups and numerical totals such as the quantity of documents, dollar amount, and hash items calculated? Are these totals compared with reports following inputs and updates and all out-of-balance conditions researched and reentered in a timely manner?
  2. Are disposal source documents such as cash proceeds and removal costs compared with the disposal form in the fixed asset system in a one-to-one check for accuracy?  Are any discrepancies researched, corrected, and reentered, and the reentered data rechecked?
  3. In a one-for-one check, is the fixed asset approved for disposal on the disposal request compared to the fixed asset removed from the fixed asset ledger?  Is the correct related accumulated depreciation removed, the net amount booked to gain or loss on disposal, and the correct date recorded for removal from service?

G. Approved general ledger adjustments are input for processing completely and accurately.

  1. In using batch totals, are input documents separated into groups and numerical totals such as the quantity of documents, dollar amount, and hash items calculated? Are these totals compared with reports following inputs and updates, and all out-of-balance conditions researched and reentered in a timely manner?

H. Approved changes to standing data are input for processing completely and accurately.

  1. Are reports following inputs and updates compared to the change source documents for completeness and accuracy as part of a one-to-one check of changes input into the system?  Are discrepancies resolved and re-entered data rechecked?

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Last Updated: 1/3/23