WP Ref.

:
Audit Program Prepared by:
Date:
Reviewed by
Date
Reviewed by
Date
Client: Ahmad Hassan Textile Mills Limited
Period: June 30, 2019
Subject: Intangible Assets

Amount in Rs.
Account balances:
Property Plant and Equipment
Intangible Assets

Classes of transactions:
Depreciation
Amortization

Loss/ gain on disposal

Impairment

S. Audit Objectives Assertions Risk Assessment

No.
IR CR CRA
1. Fixed assets are completely and
accurately recorded CA
2. All recorded fixed assets actually exist. E
3. Fixed assets are recorded at appropriate
values. V
4. Fixed assets recorded are owned by the
client and title is also in the name of
client. R
5. Depreciation /amortization / impairment
expense and gain/ loss on disposal has
been accurately calculated and
appropriately disclosed. OCATL
6. Fixed assets are presented and all
disclosures have been given in
accordance with the Fourth / Fifth
Schedules of t h e Companies Act, 2017 OCAL
and relevant IASs. RVU
 S. Audit Procedures Objective Done by W. P. Ref.
No.
Test of Controls
1. Assess the reasonableness of design ALL
of system of internal control by enquiring
relevant client personnel and
documenting the same (if not a
documented system manual has been
developed by the client). A walk through
test would be necessary to confirm the
understanding as documented. Identify
the preventive (exercised before
occurrence of transactions and event)
and detective (exercised after occurrence
of transactions and event) controls
established by management to support
2. Check on sample of selected ALL
transactions covering the whole period
that all preventive controls are exercised
on all transactions.
3. Check that proper fixed assets register ALL
has been maintained and entries are
made in the register on prompt and
consistent basis and the same is
reconciled with general ledger and
physically verified assets on periodical
4. Check on a sample of transactions CE
that detective controls are appropriately
been exercised and in case of any
detection of error/ fraud, proper steps
have been taken to avoid recurrence of
5. Ensure that management does
not override the designed
controls by:

 Enquiring from the designated staff

person
 Remain skeptical during performing
test of design and test of effective
6. Document the conclusion after N/A
performing test of controls and required
level of assurance from substantive
Analytical Procedures
1. Assess the appropriateness of U
depreciation/ amortisation method and
rate in view of the flow of economic
benefits and useful life of the assets.
 S. Audit Procedures Objective Done by W. P. Ref.
No.
2. Check the reasonableness of depreciation CAL
expense by applying depreciation rate to
closing cost/ carrying value as per the
method adopted
3. Document logical commercial reasons for AU
major additions and disposal made during
the year and check whether the additions
are in accordance with the objects of the
company
4. Compare current year balances and CEA
expense with last year balances and
expenses and ensure that any significant
variation should be properly and logically
reasoned.
Test of Details
1. Obtain movement schedule of tangible CEA
and intangible fixed assets and Capital
work-in-progress both for cost,
accumulated depreciation and
impairment. Check casting and cross
casting of the schedule.
2. Trace opening balances from fixed assets CE
register, general ledger and last year’s
working papers.
3. Make a selection of fixed assets held by CEV
client at year-end and physically inspect
them to ensure that:

(a) Asset is owned and held by client.

(b) Remaining useful life appears to be
correct
(c) No new / further impairment is
needed
 S. Audit Procedures Objective Done by W. P. Ref.
No.
4. For selected additions during the current CEV
period:
(a) For purchases in current year, obtain
/ see capital expenditure approvals
and vendor’s invoices.
(b) Ensure that additions to fixed assets
do not include any amount of a
nature of revenue expenditure.
(c) Ensure that where full payment has
not been made for what so ever
reason, asset is recorded at full cost
and balance has been recognized as
liability.
(d) Obtain evidence of transactions
involving property, plant and
equipment (purchases/other
additions/sales etc) by examination
of original documentation.
(a) Review the entity’s capitalization
policy and check whether the assets
are recognized as per the criteria laid
by the policy

5. For selected assets disposed of during OAL

the current period:
(a) Obtain / see disposals approval
(b) Examine documents authorizing
disposal.
(c) Examine documents supporting
amounts for which assets were sold
e.g. cash receipts
(d) Calculate gain or loss on disposal of
fixed assets
6. To check depreciation expense: OCAL
(a) Determine the reasonableness of
accounting policy and depreciation
method, rates and their consistency
with prior years.
(b) Check calculation of depreciation of
selected assets.
(c) Assess the reasonableness of
allocation to manufacturing costs,
admin cost etc.
 S. Audit Procedures Objective Done by W. P. Ref.
No.
7. Ensure that none of the assets is impaired V
or the recoverable amount of an asset is
not less than its carrying amount. If the
carrying amount of an asset is more than
its recoverable amount, that same should
be reduced to recoverable amount
recognizing the reduction as impairment
loss.

Ensure that any subsequent addition

should be depreciated over remaining
useful life and not simply depreciated by
applying the depreciation rate.
8. Inspect evidence of ownership e.g. title R
deeds, contracts , vehicle registration,
property documents, machinery import
documents etc.
9. Where assets are self-constructed and
include a proportion of capitalized interest,
administrative costs or other overheads
perform tests to ensure that only
permissible amounts are included in asset
cost.
10. Make enquiries and examine lease
contracts to provide evidence that assets
acquired under finance leases or hire
purchase agreements are properly
capitalized.
11. Examine board minutes and other
correspondence looking for indications of
significant asset acquisitions, disposals or
retirements.

12. Perform procedures to obtain

corroborating evidence that the entity
actually possesses the rights associated
with assets or intangibles - e.g. that the
cash flows or economic benefits
associated with it are actually accruing to
13. the entity.
Construction Contracts; Where a valuation
is performed internally - consider the
basis on which it was done, the adequacy
of the evidence obtained to support the
valuation and the overall reasonableness
of the result.
 S. Audit Procedures Objective Done by W. P. Ref.
No.
14. Construction Contracts; Site attendance
for evidence of contract work in progress
and assessment of stage of completion of
contract.
15. Construction Contracts; Examine contract
terms and agreements
16. Construction Contracts; Inspect architects'
or quantity surveyors’ certificates to
support stages of completion
17. Construction Contracts; Examine post
year end transactions and
correspondence
18. Construction Contracts; Examination,
testing or re-performance of calculations
of attributable profits/foreseeable losses
and contract balances.
19. Construction Contracts; Where contract
work is subject to valuation by internal
valuers consider the basis on which it was
done, the adequacy of the evidence
obtained to support the valuation and the
overall reasonableness of the result. Look
for evidence of realizability of values post
year end.

Where contract work is subject to

valuation by external valuers, apply
procedures on form Reliance on experts
20. D4.7.
Construction Contracts; Examination of
post year end cash receipts - as evidence
of recoverability of recorded receivables
and as an indication of potential bad
receivables.
21. Construction Contracts; Direct
confirmation of balances with third parties.
22. Ascertain the nature of each significant E
intangible asset by inquiry or reviewing
information contained in prior-year’s
working papers.
23. Ensure that all intangible assets fully EVR
comply with the definition (identifiable,
control and flow of economic benefits)
and recognition criteria of the IAS 38 i.e.
(a) Flow of economic benefits to
enterprise is expected in future, and
(b) Cost of the asset may be determined
 S. Audit Procedures Objective Done by W. P. Ref.
No.
24. For selected intangibles additions during V
the year: -
(a) Approval in Board meeting
(b) Trace the recorded value to
supporting documents e.g.
independent valuation for purchases
in current year.
(c) Obtain authorization or board
minutes.
(d) Obtain evidence of transactions
involving intangibles
(purchases/other additions/sales etc)
by examination of original
documentation.
25. For selected intangible assets disposed- CEV
off during the year: -
(a) Examine supporting documents (e.g.
cash receipts).
(b) Calculate gain or loss on sale of
assets
26. Examine documents conferring rights
associated with the intangible - e.g.
contracts, licenses - to obtain evidence of
existence.
27. Determine that client's accounting policies U
for amortization are appropriate and
applied consistently. See that intangible
assets with indefinite life are subject to
impairment review.
28. For additions in leased assets during the CEKR
year, check from lease agreements that
the lease is a finance lease in substance.
29. Ensure that depreciation on leased assets OCV
is calculated on the same rates as for
owned assets.

If there is no reasonable certainty that the

lessee will obtain ownership by the end of
the lease term, the assets should be fully
depreciated over the shorter of the lease
term or its useful life.
30. For selected additions to CWIP during the E
year: -
(a) Check supporting documents like
vendors' invoices, contractor bills,
and other evidences.
(b) Check proper authorization and
approval.
 S. Audit Procedures Objective Done by W. P. Ref.
No.
31. For selected transfers to fixed assets K
during the year, check contractor
certificates of completion of project and
proper approval thereof and examine the
stage of completion.
32. For items stuck-up for considerable period V
of time, inquire about its status from the
management. Compute provisions if
required and ask for management
representations.
33. In case of revalued assets ensure that V
 Entire class of assets has been
revalued on periodical basis
 Any asset's revaluation results in
deficit should not be adjusted
against other assets' surplus but
should be immediately charged.
 Depreciation is charged on revalued
amount and remaining useful life
 Revalued amount and incremental
depreciation should be transferred to
other comprehensive income
34. Ensure that closing balances as per our N/A
working paper file are in match with
general ledger.
35. Determine that disclosures have been OCAL
made in accordance with the RVU
requirements of Fourth Schedule to the
Companies Act, 2017 and the applicable
IASs.