Plant and Machinery
A plant is an asset with a useful life of more than one year that is used in producing revenues in a business’s operations. Plant is recorded at cost and depreciation is reported during their useful life.
1. When the machines are purchased in the current accounting period, the invoices and the agreement with the vendors should be verified.
2. The auditor should examine the plant register in which particulars about the cost, records about sales, provision for depreciation, etc., are available.
3. He should prepare a list of each machine from the plant register and should get the list certified by the works manager as he is not a technical person and therefore he has to depend upon the advice of the works manager regarding their valuation, etc.
4. He should see that plant and machinery account is shown in the Balance Sheet at cost less depreciation after making proper adjustment for purchases and sales during the year under audit.
5. In case any plant and machinery has been scrapped, destroyed or sold, he should ascertain that the profit or loss arising thereon has been correctly determined.
A proforma of plant & machine register is given below
Furniture, Fixtures and Fittings
They are items of movable equipment that are used to furnish an office. Examples are chairs, desks, shelves, book cases, filing and other similar items.
1. Verify Invoices:
When assets have been acquired during the current accounting period, the auditor should examine the purchase invoice of the dealers.
2. Verify Furniture Stock Register:
He should verify furniture stock register and ask the management to prepare an inventory to reconcile it with the stock register.
3. Verify Schedule of Previous Year:
He should compare furniture schedule of previous year with that of current year to ascertain the existence, purchase or sales of asset during the year.
4. Disclosure of Profit or Loss on Sale:
He should examine that any profit or loss on sale of furniture during the year is properly disclosed in books of accounts.
VALUATION OF FIXED ASSETS
1. Valuation of Land:
Land which does not have depreciated value, is valued at cost price.
2. Valuation of Other Fixed Assets:
Other fixed assets like Buildings, Plant, machinery, office equipment, furniture and fixtures should be valued at going concern value.
Auditor should ensure that adequate amount of depreciation has been provided, taking into account the working life and usage of the asset.
4. Disclosure in Balance Sheet:
He should verify that furniture, fittings and fixtures are disclosed in Balance Sheet at cost less depreciation.