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Controls: Investment Cycle - Coggle Diagram
Controls: Investment Cycle
Occurrence/Validity
: All recorded assets are valid (really exist) and are supported by proper documentation.
Internal control:
1. All assets purchased are supported by a fixed asset requisition and capital budget ( supporting documents)
Recorded Assets are periodically compared to physical assets by an independent senior official
Test :
Select a sample of fixed asset purchases and inspect that the supporting requisition and capital budget exists.
Enquire with the client's personnel about the procedures w.r.t. purchasing of fixed assets and periodic comparison of fixed assets with book assets.
Inspect proof of comparisons by client official (signature).
Authorization :
All purchases and sales are authorised according to company’s policy
Internal Control:
Purchases and sales of fixed assets. Authorized by senior management on a numerical capital requisition/sales document
Authorization /decision recorded in minutes
Test :
Enquire with the client personnel about the policy w.r.t. the authorisation of purchases and sales.
Inspect that there is a numerical capital requisition /sales document.
Inspect that the decision was recorded in the minutes as proof of authorisation.
Completeness :
All valid fixed assets are recorded and nothing is left out.
Internal control :
Capital requisitions are numerically accounted for (Sequentially pre-numbered).
The list of missing numbers is regularly followed up.
Fixed assets are recorded in a fixed asset register and are regularly compared with fixed assets (see reference to the test under validity).
Test :
Inspect that the capital requisitions are in numerical sequence.
Inspect that there is proof of client review (signature) that missing numbers are followed up.
Inspect the fixed asset register for proof of review (signature).
Accuracy:
All fixed assets are recorded at the correct amount and totals are arithmetically correct
Internal Control:
Fixed assets are recorded at the amount of the invoice
Depreciation and other calculations are done by computer with a program that has been tested beforehand (if the calculation is per hand, perform an independently reviewed calculation).
Test :
Enquire from management about procedures followed when recording an asset.
Inspect that the assets are recorded as per the amount on the invoice.
Test the functioning of programmed controls (e.g. test date). If calculation performed by hand, inspect schedules for proof of client review of calculation.