Auditing Fixed Assets and Inventory

Introduction

Fixed assets and inventory often represent a large share of an organisation's balance sheet, and they are exposed to loss, theft, damage, obsolescence and misstatement. Weak controls can result in assets that exist only on paper, stock that cannot be found, inflated valuations and poor decisions on purchasing and maintenance.

This Auditing Fixed Assets and Inventory training course provides auditors with a practical approach to reviewing the full life cycle of physical assets. Participants learn how to audit capital expenditure approval, asset registers, tagging and physical verification, depreciation and impairment, disposals, inventory receipt and storage, stock counts, valuation and write-offs.

The course also shows how data analytics, site visits and observation can be combined to give strong assurance and identify opportunities to improve asset utilisation and reduce losses.

Course Objectives

By the end of this training course, participants will be able to:

• Identify the main risks over fixed assets and inventory
• Plan risk-based audits of asset and inventory processes
• Audit capital expenditure approval and capitalisation decisions
• Test asset registers, tagging and physical verification
• Review depreciation, impairment and disposal controls
• Audit inventory receiving, storage, issues and stock counts
• Evaluate inventory valuation, obsolescence and write-offs
• Use analytics to identify asset and inventory anomalies

Target Audience

This training course is suitable for a wide range of professionals, including:

• Internal auditors and audit managers
• Financial controllers and accountants
• Warehouse and inventory managers
• Asset and facilities managers
• External auditors
• Risk and compliance professionals

Training Methodology

The course uses sample asset registers, stock records, count sheets and valuation reports. Participants plan and simulate a stock count, test an asset register, analyse inventory data for slow-moving and obsolete items and review disposals. Case studies illustrate asset misappropriation schemes and their detection.

Target Competencies

• Asset and inventory risk assessment
• Asset register testing
• Stock count planning and observation
• Valuation review
• Asset analytics
• Loss prevention recommendations

Day One: Risks and Planning for Asset Audits

• Types of fixed assets and inventory and their risks
• Accounting principles for assets and inventory in overview
• Key controls across the asset and inventory life cycle
• Understanding systems, registers and warehouse processes
• Risk assessment and scoping of the audit
• Planning site visits and data requests
• Exercise: building a risk and control matrix

Day Two: Capital Expenditure and Asset Registers

• Capital budgeting and approval of capital projects
• Capitalisation policy and distinguishing capital from revenue
• Asset register completeness and accuracy
• Asset tagging, location and custodian records
• Physical verification and reconciliation to the ledger
• Assets under construction and project transfers
• Exercise: testing a sample asset register

Day Three: Depreciation, Impairment and Disposal

• Depreciation methods, useful lives and residual values
• Recalculating depreciation and identifying errors
• Indicators of impairment and impairment reviews
• Asset transfers between locations and entities
• Disposal approval, valuation and proceeds
• Write-offs, scrapping and donation of assets
• Case study: misappropriation through disposal processes

Day Four: Inventory Controls and Stock Counts

• Receiving, inspection and recording of goods
• Storage security, access and segregation of duties
• Issues, transfers and returns controls
• Planning, observing and testing stock counts
• Cycle counting programmes and their effectiveness
• Investigating and approving count differences
• Exercise: planning and observing a stock count

Day Five: Valuation, Analytics and Reporting

• Inventory costing methods and valuation checks
• Slow-moving, obsolete and damaged stock provisions
• Analytics for stock ageing, turnover and anomalies
• Identifying unused and underutilised assets
• Writing findings that reduce loss and improve utilisation
• Agreeing management actions and follow-up
• Personal action plan for asset and inventory auditing