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Capex audit checklist

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Capex audit checklist

  1. 1. AUDIT CHECKLIST Name of the Company Address of company Year ended PAN No. Partner Name Signature Manager Name Signature Prepared by Name Signature Date of commencement of Audit Date of Report Financial statements Detail of Audit Team 1. 2. 3. 4. Page 1 of 21
  2. 2. AUDIT CHECKLIST FIXED ASSETS Yes/No/ NA Further information/details as appropriate Please summarise your audit approach to: • Verifying the completeness of property, plant equipment and other tangible assets e.g. by vouching additions and disposals and inter group transfers; • Verifying the existence and ownership of: properties; and other assets e.g. physical inspection of assets and examination of title deeds. • Verifying the valuation (including method of valuation) of fixed assets If any documents of title are held other than by bankers and mortgagees, please give details and the reason why such documents are so held. Is the company's policy of capitalisation and depreciation in accordance with applicable Accounting Standards, if any, and consistent with the previous year? If no, please provide further details Have the details of leases that should be capitalised been reported in the [financial statements]. If no, please provide further details Are you satisfied that there is no permanent impairment (AS-28) in the value of the company's fixed assets below the net book amounts? Please give brief summary of verification procedure. If no, please provide further details Please give details of asset revaluations during the year and indicate whether based on professional valuation or director's estimate. Is depreciation provided on all items of Fixed Assets (other than land) not fully written off or carried at salvage value? If no, please provide further details Are you satisfied that there are no exceptional or additional depreciation charges, or circumstances that could warrant such charges in the future? Page 2 of 21
  3. 3. AUDIT CHECKLIST FIXED ASSETS Yes/No/ NA Further information/details as appropriate Have idle facilities been separately identified and accounting treatment for such assets disclosed in the company's [financial statements]? If no, please provide further details Have the details of any assets which are the subject of an instalment purchase arrangement been reported in the financial statements or supporting data? If no, please provide further details Did you encounter any difficulties in assessing the estimated lives of fixed assets? If yes, please give details including situations where a permanent diminution has occurred. Are you satisfied that costs of repairs and maintenance are properly charged to operations and have not been carried as an asset? If no, please provide further details Where the company has assets in the course of construction, can you confirm that you are satisfied that the basis used for capitalising interest and/or indirect expenses is appropriate. If you are unable to confirm, please provide further details. Have you reviewed transactions recorded as construction in progress and reasonably determined that there are no amounts that should have been charged to operations? If no, please provide further details Are you satisfied th INVESTMENTS Yes/No/ NA Further information/details as appropriate Did you verify the existence and ownership of significant investments? If no, provide details of the alternative procedures performed Page 3 of 21
  4. 4. AUDIT CHECKLIST How have you satisfied yourself as to the valuation of unquoted investments? How have you satisfied yourself as to the valuation of quoted investments? Are you satisfied that there has been no other-than- temporary impairment requiring the write-down of the carrying amounts of any investments? Have investments where the company is able to exercise significant influence over the operating and financial policies of the investee corporation been properly accounted for in accordance with [AS/ GAAP] If no, please provide details. In respect to the investee corporation financial statements that were used as a basis for current year's earnings under the equity method of accounting: a. Did the statements cover the same period as that for the company upon which you are reporting? b. Were the financial statements audited and an unqualified opinion expressed? Please provide a copy of the statements. Have you reviewed the transactions with the company's investees and confirmed balances with them? c. Have inter company profits been eliminated before including the company's proportionate share of operations? Have marketable equity securities been accounted for in accordance with [AS/ GAAP], and have the disclosures required been given in the [financial statements]? If no, provide details. Have significant gains or losses on disposals, or changes in market value, between the dates of the balance sheet and your opinion, been disclosed in the company's financial statements or the consolidation accounting package? If no, provide details. INTANGIBLE ASSETS Yes/No/ NA Further information/details as appropriate Page 4 of 21
  5. 5. AUDIT CHECKLIST Have goodwill and other intangible assets been appropriately accounted for in accordance with [AS/GAAP] Have you verified the ownership of assets, such as patents and trademarks? If no, please provide details of the alternative procedures performed How have you satisfied yourselves that the company's intangible assets have been appropriately tested for impairment and their carrying values adjusted, if necessary, in accordance with [AS/ GAAP] If no, provide details Have all intangible assets been correctly classified and disclosed in the [financial statements],? If no, provide details Is the amortisation policy consistent with prior years and reasonable with regards to residual values and useful lives? If no, provide details Are the residual values and useful lives assigned to intangible assets reasonable with regard to the nature of the asset and in accordance with AS/GAAP]. If no, provide details Page 5 of 21
  6. 6. AUDIT CHECKLIST I NVENTORY Yes/No/ NA Further information/details as appropriate Was a physical inventory count carried out at the balance sheet date? If no, please provide details of the methods used by the company to verify inventory at the balance sheet date and the audit procedures performed. If yes, was a comparison made between inventory records and quantities counted, were differences investigated, explained, and adjusted on the records, and did you test such comparisons? If no, please provide details Did you attend the physical inventory count(s) If yes, please give details of the locations visited If no, please provide details as to how you have satisfied yourself as to the physical quantities existing at the balance sheet date Did you satisfy yourselves, by observations during the physical inventory count, that the company's methods were satisfactory? Did you perform test counts and check the results with final inventory listings, to establish the reliability of the company's counting? If not, provide details of the alternative procedures performed. Page 6 of 21
  7. 7. AUDIT CHECKLIST If the year-end inventory figures are determined wholly or in part from perpetual inventory records, did your procedures include: a. Observation of cycle counts and appropriate testing? b. Checking of test counts to the records to determine that the records have been adjusted to agree with the physical counts? c. Substantiation of the quantities on hand of selected items at year-end by physical inspection and checking with records? d. Determining that a proper cut-off was made? e. Testing arithmetic accuracy and compilation of records from receiving and shipping documents relating to the receipt and transfer of goods? If not, provide details of the alternative procedures performed. Were any inventories held by third parties at the balance sheet date? If yes, have you obtained direct confirmation of inventories held by third parties at the balance sheet date, or, if material, did you observe the counting of such inventory? If no confirmation obtained, provide details of the alternative procedures performed. Did you test cut-off with particular reference to sales and purchases, work in progress transfers, and intercompany or interdepartmental transfers? If not, provide details of the alternative procedures performed. Have you tested the arithmetical accuracy of final inventory figures, including computations, footings, checking from original count sheets, and reconciliation with the general ledger? If not, provide details of the alternative procedures performed. Page 7 of 21
  8. 8. AUDIT CHECKLIST Are the bases of inventory valuation (i.e., raw materials, work in progress, and finished goods): • Consistent with the prior year? • In accordance with [AS/GAAP] Have full details of these bases been supplied to us? If not, provide details, including the audit procedures performed. Were there any areas where you has difficulty establishing whether the value of inventory is fairly stated and in accordance with [AS/GAAP]? If yes, provide further details Do costs include an appropriate proportion of manufacturing, but not administrative or selling overhead, and is the allocation of expense between manufacturing overhead, administration, and selling expenses on a reasonable and consistent basis? Does the inventory valuation exclude research and development expenditure? If not, provide details, including the audit procedures performed. If standard costs are used: a. Have they been updated to reflect current operations? b. Is an adjustment to “actual” made where variances appear to require it? c. Have you tested computations from product specifications? If not, provide details, including the audit procedures performed. If job order or process costs are used, have you tested the build-up of costs from records of expenditure on labour, materials, and overhead? If not, provide details, including the audit procedures performed. Page 8 of 21
  9. 9. AUDIT CHECKLIST Have you tested to ascertain that inventories have been valued at the lower of cost or market? i) Market should not exceed the net realizable value (i.e., estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal) and ii) Market should not be less than net realizable value reduced by an allowance for an approximately normal profit margin. Please provide details of all provisions made against inventory, including any general provisions. Have satisfactory explanations been given to you regarding material fluctuations in rates of gross profit, inventory levels, and differences between book and physical quantities? If not, provide details, including the audit procedures performed. Long Term Contracts Are you satisfied that long term contracts and any resulting provisions have been properly accounted for under [AS/GAAP] If not, please provide details, including the audit procedures performed Are you satisfied that inventory has been correctly classified between raw materials, work in progress and finished goods? If no, provide further details RECEIVABLES Yes/No/ NA Further information/details as appropriate Are you satisfied with the procedures for cut off and have you tested for periods just before and after year-end? If not, provide details of alternative procedures performed Have you performed an accounts receivable circularisation? If yes, please provide a summary of the results of the circularisation. If no, please provide details of the alternative procedures performed to satisfy yourself as to the validity of accounts receivable Page 9 of 21
  10. 10. AUDIT CHECKLIST RECEIVABLES Yes/No/ NA Further information/details as appropriate If confirmation procedures were carried out at other than the balance sheet date, please provide details of the rollforward procedures undertaken? How have you satisfied yourself that the company has a satisfactory procedure for identification, control, and recovery of past due accounts? Does the company have a consistent policy of providing allowances for uncollectible and doubtful debts, and do you consider the provision adequate, but not excessive? If not, provide details of alternative procedures performed Have you obtained reasonable explanations of trends in the ages of the receivables, and ratios of sales to receivables, allowances, and bad debts? If not, provide details of alternative procedures performed If any receivables have arisen other than as a result of normal operations, provide details as to how have you adequately satisfied yourself as to their validity and collectibility? Have you obtained third party confirmation in instances where material amounts have been factored? If not, provide details of alternative procedures performed How have you satisfied yourself that the provision for credits issued post year end and other write-offs is adequate at the balance sheet date? Are any goods sold on approval or on a sale or return basis? If yes, how have you satisfied yourself that these transactions have been accounted for correctly under [AS/GAAP], including any resulting provisions. Have you determined through normal audit procedures that no receivables are pledged or hypothecated except as disclosed? If not, provide details of alternative procedures performed Page 10 of 21
  11. 11. AUDIT CHECKLIST RECEIVABLES Yes/No/ NA Further information/details as appropriate Have long-term loans been confirmed by the borrower? If not, provide details of alternative procedures performed. If any receivables are the result of sales on instalment agreements, have details been provided in the financial statements. Have you obtained third party confirmation in instances where material amounts have been factored? Have receivables and sales for goods in the hands of customers on a contingent basis (e.g., on approval, on sale or return) at year-end been eliminated from the receivables and sales and has the value of such goods been included in inventories? If the company bills customers before shipping the merchandise: Have you ascertained that billings for unshipped goods at year-end have been eliminated from receivables and sales and has the inventory value of such goods been included in inventories? In those unusual cases under "bill and hold" arrangements with customers where title has passed to the customer for such unshipped goods, have you ascertained that such "bill and hold" accounting is appropriate and have been confirmed? Please provide details of any other receivables in the financial statements, along with details of the audit procedures performed. Page 11 of 21
  12. 12. AUDIT CHECKLIST CASH & BANK Yes/No/ NA Further information/details as appropriate Have you obtained direct confirmation of all bank balances, bank facilities and related guarantees and that there was no other information contained in the bank's reply which should be brought to our attention. If no, please provide further details. Provide details of the audit procedures performed to ensure that bank cut-off procedures have been performed correctly. Have any large or unusual transfers between bank accounts, affiliates, subsidiaries, or other unusual transactions, occurring just before or after year-end, been adequately explained. Please give brief summary of your verification procedure. Where material cash in hand balances existed at the balance sheet date, were such balances (or a sample of them) were counted by you at that date. Please give details of the locations visited and the results obtained. If no physical counts were undertaken, please give details of the verification work carried out. Please give details of any right of set-off in respect of the company's balances with those of other members of the group. Are you satisfied with daily cash balances Please explain the reason for any unusual balance during the year Are you aware of any restrictions, which might limit the company's ability to remit funds to the country in which its parent company is registered? If yes, please give further details. Are cash balances, overdrafts and loans are correctly classified and full disclosure of any security given has also been disclosed in the financial statements. If no, please give further details. Have bank balances been verified and have other related matters confirmed by the banks been properly reflected in the financial statements If no, please provide details of alternative procedures performed Page 12 of 21
  13. 13. AUDIT CHECKLIST LIABILITIES AND PROVISIONS Yes/No/ NA Further information/details as appropriate How have you verified accounts payable? How have you satisfied yourself that there are no recorded liabilities or provisions that are materially less than or in excess of requirements? Have you made tests of un-entered invoices, cash disbursements, and unmatched receiving reports for the period after the balance sheet to determine that adequate accruals were provided? If no, provide details of alternative procedures performed. Have all liabilities or contingent liabilities relating to employee benefits (e.g., termination pay, etc.) been recorded or disclosed in the financial statements. If no, provide further details Are all material liabilities and accruals recorded disclosed in the financial statements If no, provide further details. Is the basis of deferring income in compliance with [AS/GAAP], reasonable and consistent with the prior year? If no, provide details. With respect to provisions established for specified purposes, have you ascertained that charges against those provisions are in accordance with the intent of the account and should not have been charged directly against income? Have costs associated with exit from or disposal of activities been properly accounted for and recorded in accordance with [AS/GAAP]? If no, provide details If the company has received any government grants in purchasing fixed assets, are you satisfied that no event has occurred which could render such grants liable to repayment? If no, please provide further details. Page 13 of 21
  14. 14. AUDIT CHECKLIST LIABILITIES AND PROVISIONS Yes/No/ NA Further information/details as appropriate Where the company has assets held under finance leases, please give details of how such assets and the related liabilities have been treated in the accounts. Please give details of any creditors which are secured and the nature of the security. Please include items covered by reservation of title clauses. Does the client have any debt? If yes, have confirmations been obtained from lenders for material loans? If no confirmations have been obtained, please provide details of alternative procedures. Have you agreed new debt transactions to authori- zations and cash receipts? If no, provide details of alternative procedures performed. Have you confirmed debt paid off or otherwise extinguished during the period? If no, provide details of alternative procedures performed. If debts have been extinguished, have any resulting gains and been properly accounted for and recorded in accordance with [AS/GAAP]? If no, provide details How have you satisfied yourself as to un-issued debentures, bonds, notes, etc.? Has the company complied with restrictions or covenants imposed either by regulations or by the terms of the lending agreements? If no, provide details of any breaches, including any resulting action taken by the company. Are you satisfied that the company have not breached any borrowing restrictions contained in their [Memorandum and Articles of Association/other documents]? If no, please give further details. Is all debt adequately disclosed in accordance with [AS/GAAP] in the financial statements. If no, provide details. Page 14 of 21
  15. 15. AUDIT CHECKLIST LIABILITIES AND PROVISIONS Yes/No/ NA Further information/details as appropriate Does the company's financial statements provide full details of: • Interest rates? • Repayment terms? • Security and guarantees? • Restrictive covenants? If no, provide details. Does the company make regular provision for costs of repairs and replacements required under the terms of any long-term leases? Please provide details of any other liabilities or provisions in the financial statements, along with details of the audit procedures performed. Page 15 of 21
  16. 16. AUDIT CHECKLIST DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS Yes/No/ NA Further information/details as appropriate Does the client have any derivative transactions as defined by [AS/GAAP]?, If yes, how have you satisfied yourself that all derivative transactions, as defined by [AS/GAAP]?, including embedded derivatives, were identified and captured in the accounting system? Did you obtain (a) an understanding of the client’s control environment and the specific controls surrounding derivative transactions and (b) any written client policy statement? If no, please provide details of the alternative procedures performed. Are all derivatives recorded as assets or liabilities at their fair values and has the client’s methods of valuing derivative instruments been evaluated? If no, provide details. For derivatives accounted for as hedges under [AS/GAAP], is there adequate contemporaneous documentation and has a quarterly reassessment been made? If no, provide details. Have appropriate derivative disclosures been made, as required by [AS/GAAP] If no, provide details INTERCOMPANY/RELATED PARTY TRANSACTIONS Yes/No/ NA Further information/details as appropriate Have all group balances been shown separately within debtors and creditors? If no, please give further details. Please give details of balances due from related/connected parties that are not part of the group. Please give details of any right of set-off in respect of the company's balances with those of other members of the group. Are there: • Emoluments paid or credited to directors who are also directors of the parent company and/or; • Capital commitments with group companies. If yes, please give further details. Page 16 of 21
  17. 17. AUDIT CHECKLIST INTERCOMPANY/RELATED PARTY TRANSACTIONS Yes/No/ NA Further information/details as appropriate Does the company require financial support from the holding company or another group company to continue trading? If yes, please confirm that you have received the necessary confirmation of financial support in writing and name the company giving the support. Is this sufficient to enable you to issue an unqualified audit report in respect of this matter? TAXATION Yes/No/ NA Further information/details as appropriate Please provide copies of: • The tax computations for the current year; • The taxation account; and • The reconciliation of the actual tax charge to the profit before taxation. Have the tax provisions been audited by the audit engagement team. If no, provide details of alternative procedures performed Has adequate, but not excessive, provision been made for taxes payable, and in particular in relation to profits, distributions, and capital gains? If no, provide details Has the company complied with regulations of the taxing authorities that could have a material effect on its financial statements? If no, provide details Have previous years' liabilities been agreed to returns filed with the taxing authorities? Have you reviewed correspondence with the taxing authorities, returns filed with them, and payments made during the year? If no, provide details as to the alternative procedures performed to satisfy yourself as to the status of taxation liabilities from prior years. Is the client in dispute with the tax authorities? If yes, please provide details, including the audit procedures performed to ensure that all relevant items are accrued or disclosed in the financial statements. Page 17 of 21
  18. 18. AUDIT CHECKLIST TAXATION Yes/No/ NA Further information/details as appropriate Are you satisfied that deferred tax has been provided for in accordance with [AS/GAAP]. Provide details of the procedures performed, including a summary schedule supporting the deferred tax amounts in the financial statements. . SHAREHOLDER’S EQUITY Yes/No/ NA Further information/details as appropriate Are the amounts and descriptions of share capital authorized, issued, and outstanding in accordance with the legal instruments, that regulate the company, and in accordance with statutory require- ments? If no, provide details Have there been any changes in share capital in the year If yes, were the changes: • Properly authorized as required by regula- tions of the company and by statute? • Adequately disclosed in the [financial state- ments /consolidation package]? • Vouched by you with cash proceeds or disbursements, or other receipts or dis- tributions of property? If no, provide details. Where an independent transfer agent keeps the company’s share register, have you obtained confirmation of shares issued and outstanding? If no, provide details of the alternative procedures performed. If share capital has been issued for consideration other than cash, how have you been able to satisfy yourselves that a fair value has been attributed to the shares and that additional paid-in capital has been appropriately treated? If shares or share options have been issued to employees, have these transactions been accounted for and adequately disclosed in accordance with [AS/GAAP], as applicable? Has the company complied with and disclosed in its financial statements any restrictions imposed by the directors, company by-laws, statute, or third parties regarding the classification of reserves, the creation of special reserves, or restrictions on the application of such reserves? If no, provide details Page 18 of 21
  19. 19. AUDIT CHECKLIST SHAREHOLDER’S EQUITY Yes/No/ NA Further information/details as appropriate Have the tax consequences of any changes in reserve balances been appropriately treated? If no, provide details With respect to special reserves set up through appropriation of retained earnings, have you ascertained that they are still required? If reserves are no longer required, provide details of the procedures performed to ensure that this movement in reserves has been correctly accounted for and disclosed under [AS/GAAP]. Are there any dividends in arrears? If yes, provide details along with the audit work performed. In the case of dividends accrued but not paid at the date of the balance sheet, have you supplied us with particulars of the dates or anticipated dates of authorization, declaration, and payment? If no, provide details If applicable, have financial instruments with both characteristics of liabilities and equity been appropriately accounted for and disclosed in the financial statements in accordance with [AS/GAAP]? If no, provide details INCOME STATEMENT Yes/No/ NA Further information/details as appropriate Have you – after an analysis of the income statement accounts – received satisfactory explanations of unusual variations as compared to previous years and expectations? If no, provide details of alternative procedures performed Have extraordinary items or exceptional charges and credits been disclosed in the financial statements. Provide details as to the procedures performed to satisfy yourself as to the completeness and validity of the amounts and disclosures Please summarise the approach you adopted to verify the completeness and accuracy of turnover and cost of sales. Page 19 of 21
  20. 20. AUDIT CHECKLIST PENSIONS Yes/No/ NA Further information/details as appropriate Please give details of any pension schemes operated by the company. Have all amounts relating to the company’s pension scheme(s) been correctly accounted for and disclosed in accordance with [AS/GAAP]? If no, please provide further details. Have you placed reliance on an actuarial valuation? If so, provide details as to how you have verified the professional standing of the actuary and how you have understood the basis on which the valuation was prepared and the scope of the work performed. Page 20 of 21
  21. 21. AUDIT CHECKLIST COMMITMENTS AND CONTINGENCIES Yes/No/ NA Further information/details as appropriate Have loss contingencies been provided and/or has appropriate disclosure been made in accordance with [AS/GAAP]? Have you determined that contingent liabilities have been properly accounted for and disclosed, including, for example, the following: a. Current or imminent litigation, including written inquiry and response from the company's legal counsel as to the nature of the matter and the expected outcome? b. Guarantees given to third parties? c. Financial instruments (foreign exchange transactions)? d. Long-term contracts for purchases or sales? e. Product guarantees and warranties? f. Claims for back compensation by employees? g. Possible additional taxes for prior periods? h. Sale, pledge, or assignment of accounts receivable with recourse? i. Endorsement, discount, sale, or transfer of notes, trade, or bank acceptances? j. Employment agreements? k. Inadequacy of the company's insurance? Can you confirm that all material capital and expense commitments disclosed in the financial statements. If no, provide details Page 21 of 21

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