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Controls: Investment Cycle - Coggle Diagram
Controls: Investment Cycle
5. Recording :
All transactions w.r.t. fixed assets and depreciation are correctly recorded
Internal controls:
All purchases and sales of fixed assets are recorded in the fixed asset ledger accounts (control account) and fixed asset register from the source documents.
The fixed asset register is reconciled with the control accounts in the ledger regularly
.
Test :
Select purchases and sales of fixed assets from the cash book and follow it through to the source documents, fixed asset register and entries in the ledger. Agree details such as the date, amount, description and category of asset.
Inspect the reconciliation and agree it with the accounting records and source documents.
Inspect the reconciliation for proof of review by a senior employee at the client.
6. Classification:
All transactions w.r.t. fixed assets are correctly classified according to its nature.
Internal controls
: Fixed assets are classified into the respective categories according to company policy.
Improvements are capitalised as fixed assets and clearly distinguished from maintenance.
Test:
Verify/enquire the procedure followed when classifying the assets and inspect/verify that the classification of assets is according to the policy.
Review the fixed assets register and the ledger accounts for maintenance costs that have been incorrectly classified.
7. Cut-off :
All purchases and sales of fixed assets are recorded in the period to which it relates
Internal Controls:
Fixed assets purchased are recorded at the date of receipt (per GRN) and when sold as from the date that the risks and rewards of ownership pass to the purchaser in substance.
Test :
Enquire about procedures w.r.t. recording and cut-off.
Select purchases and sales from source documents and follow them through to the ledger accounts and fixed asset register - ensure recorded in the correct period. (Test also in other directions from records to supporting documentation).
General Controls:
Assets are properly safeguarded against theft and physical elements.
Internal Control :
Fixed assets are, as far as possible, stored in permanent form (bolted).
Safe guard assets by:
Limiting access to authorised persons (locked, key control)
Controls protecting assets against physical elements (rain, weather)
Asset adequately insured
Test :
Enquire with personnel about procedures w.r.t. safeguarding.
Observe the procedures w.r.t. safeguarding.
Investigate the company’s insurance policy and proof of application of the policy requirements.
Confirm by way of enquiry and inspection of insurance contracts that the assets are insured.