Fixed Assets Auditing in Educational Institutions
Fixed Assets in the shape of land, building, and equipment constitute a major chunk of the assets of an educational institution. Timely maintenance, effectively tracking and performing audit of these assets is mandatory for educational institutions. Asset auditing ensures the accurate records of internal assets.
Asset auditing constitutes 2 phases:
- Valuation and Disclosure
The verification of fixed assets consists of
- Examination of records
- Review of physical verification conducted by the management
The following are important procedures in this regard:
- Verifying the opening balance of Fixed Assets
- Verify the compliance with Accounting Standard (AS) 10, “Accounting for Fixed Assets” & review lease agreements with respect to Accounting Standard (AS) 19, “Leases”
- Examining the ownership of buildings & lands
- Verifying whether vehicle registration is as per RTO
- In respect of fixed assets retired i.e., destroyed, scrapped or sold, the internal auditor should examine whether:
- The retirements have been properly authorized
- The asset and depreciation accounts have been properly adjusted
- The sale proceeds, if any, have been fully accounted for
- Ensuring resulted gain or loss is properly recorded
- Examine any major additions or reductions to fixed asset register
Valuation and Disclosure
All the fixed assets should be valued and recorded into the financial statements as per the generally accepted accounting practices that suits educational institutions. Accounting Standards (AS) 28, “Impairment of Assets” needs to be followed and implemented during audits. The internal auditor should test & check the calculation of depreciation, the same should be compared with that of the preceding years and identify reasons for variations.
An illustrative list of inventory maintained in an educational institution is as under:
- Printing and Stationery
- Fixtures and Furniture
- Mess Equipments and Utensils
- Lab Equipments
- Sports and Gym
- Physics & Chemistry Lab (for items issued to Lab)
- Daily maintenance receipt (for items issued for maintenance)
- Repairs (for items sent for repairing).
- Land & Buildings
- School Buses
- Computing Devices
- Flag Poles
- Musical Instruments
- Intercom Systems
- Stage Lighting
- Phone Systems
An internal auditor should:
- Examine the internal control over the receipt, issue, maintenance, leakage, etc. of the assets
- Verify the above-mentioned inventory from the following documents:
- Copy of Purchase Orders
- Challans/Duplicate Bills File
- Stores Issue Slips
- Material Inward Register
- Bill Dispatch Register (for bill sent to accounts/purchase department)
- Issued and Received Register (for items issued but to be returned back).
- Check the opening balances of the items.
- Verify the list of defective/scrapped/destroyed items and the loss to be recognized in the income and expenditure account.
- Inspect reports of physical inspections carried out by the Inventory Management Department, Accounts Department, verify the movement of assets in& out of institution etc.
- The internal auditor may refer to Accounting Standard (AS) 2, “Valuation of Inventories”. Ensure the policies are implemented and managed accurately