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AUDIT PROGRAM

CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
AUDIT OBJECTIVES
To determine whether:
A. Assets subject to finance lease represent all tangible
assets held under finance lease that are used in the
entity's operations or are under construction, and these
are properly recorded at cost on a consistent basis.
B. Additions to assets subject to finance lease during the
audit period represent all assets acquired under
finance lease during the period.
C. The costs and related accumulated depreciation,
depletion and amortiation amounts applicable to all
retirements ! transfers and dispositions ha"e been
properly remo"ed from the accounts.
#. Accumulated depreciation, depletion and amortiation
accounts are reasonable, considering the e$pected
useful li"es of the property units and e$pected net
sal"age "alues, and are consistent with those of own
assets.
%. Assets subject to finance lease, at boo& "alue, can
reasonably be e$pected to be realised and are not
impacted by any impairment.
SUBSTANTIVE PROCEDURES
1. Overall Analytial Revie!
'.' (btain roll forward schedules of cost and accumulated
depreciation. )oot and trace ending balances to the
lead schedule. Tie the additions, retirements and
depreciation pro"ision for the year to supporting
schedules. Tie beginning balances to prior year
wor&ing papers.
'.* +econcile selected period,end accounts with the
subsidiary records.
'.- Compare the balance of each significant account with
the comparable balance for the preceding period.
Consider the reasonableness of differences in the light
of budgeted capital e$penditure, recent acquisition of
disposal of assets, new product lines, discontinued
products, etc. .cope!.ample: / 0
AUDIT PROGRAM
CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
'.1 Compare the balance of each significant maintenance
and repairs account with the budgeted amount and the
balance for the preceding audit period. 2n"estigate
significant fluctuations for possible amounts e$pensed
that should ha"e been capitalied or amounts
capitalied that should ha"e been e$pensed.
'.3 )or self constructed leased assets compare the actual
cost recorded for additions, indi"idual wor& orders
with the budget or authoried amounts. 2n"estigate
de"iations and determine whether e$cess e$penditures
were authoried and appro"ed.
'.4 5a"e the client prepare a summary analysis of the
acti"ity in each significant property and accumulated
depreciation account for the current period. The
schedules should include the following for each 67
account:
i0 Account description
ii0 Beginning and ending balance
iii0 Total additions and deletions made during the
year
i"0 Transfers and other adjustments
"0 8ethod of depreciation
"i0 +ange of useful li"es used in determination
of depreciation.
'.9 %nsure that the components of fi$ed assets register are
at the minimum corresponds with the requirement of
T+,4 of 2CA:.
'.; %nsure that the assets of the Company are completely
insured and inquire the basis of insurance co"erage,
e.g. at cost, boo& "alue or replacement cost.
'.< Compare the boo& "alue of assets with the sum
insured and determine any o"er ! under insured
amount.
". Physial Veri#iati$n
*.' Tour the plant facility before physical "erification
preferably atleast '3 days earlier to the year,
end!in"entory obser"ation date.
*.* (bser"e the ta&ing of physical in"entories of selected
property categories, noting the adequacy of the client's
procedures and the condition of the property items.
Consider using 2n"entory (bser"ation Chec&list.
*.- :repare a summary memorandum describing the basis
for selecting locations obser"ed, the procedures
followed during the obser"ations and the principal
obser"ations.
AUDIT PROGRAM
CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
*.1 Conclude as to the effecti"eness of the methods of
in"entory,ta&ing and the measure of reliance that may
be placed on the client's representations about the
quantities and physical condition of the property
items.
*.3 +e"iew the reconciliation of the physical in"entory to
the general ledger balances!subsidiary records assets
subject to finance lease. #etermine whether
reconciling items ha"e been properly accounted for.
*.4 Through discussions with appropriate client
personnel, determine whether idle, under,utilied,
poorly performing or obsolete property e$ists.
#etermine whether, and on what basis, the client has
made appropriate write downs for any such items and
whether any additional write downs should be
recorded to state them at their net realiable "alue.
%. A&&iti$ns
-.' )or major additions, obtain a listing of additions o"er
+s. ==========. +e"iew support for all additions
o"er +s. ==========. Compare all additions with
corresponding additions in liabilities against finance
lease.
-.* (bser"e all additions o"er +s. ==========. +elate
any large!unusual additions to appro"al in B(#
minutes.
-.- .can the supporting subsidiary ledgers and other
similar records to ensure that all the additions o"er a
listing scope are properly included in the assets
subject to finance lease. +e"iew in"oice and other
supports for all additions o"er +s. ==========.
-.1 %nsure that all the additions o"er +s.*>>,>>>!, are
specifically appro"ed by the Board of #irectors and if
not, then co"er such appro"al in co"ering letter as a
condition for signature of auditors? report.
-.3 %nsure that start,up and pre,production costs ha"e not
been added to the cost of an asset unless it is
necessary to bring the assets to its wor&ing condition.
-.4 #iscuss with appropriate client personnel the assets
addition appro"al process and prepare system notes.
%nsure compliance on test basis.
-.9 (btain fi$ed assets register from the management and
trace all significant additions made during the year.
Also chec& that the addition to fi$ed assets register is
made whether on an indi"idual basis or as a bundle
asset.
AUDIT PROGRAM
CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
-.; 2n case of sale and lease bac& arrangement, ensure
compliance of 2A.,'9, particularly ensuring the
correct treatment for gain!loss on such transaction.
'. Deleti$ns / Trans#ers
1.' (btain a listing of all dispositions o"er
+s.========== and transfers to owned assets
indicating the accounting treatment for each, and
re"iew propriety of accounting. 2nquire if there are
any unrecorded retirements.
1.* )oot schedule and tie gain!loss on disposition to lead
schedule.
1.- %nsure that cost and accumulated depreciation is
adequately transferred to the owned assets for all
leases where the lease term has e$pired, all payments
including the adjustment for deposit!down
payment!residual "alue ha"e been made and in"oice is
recei"ed from the lessor.
1.1 +e"iew the sales in"oice issued by the leasing
company in case when asset is transferred from lease
assets to own assets upon completion of the leasing
period.
1.3 %$amine cash receipts, if any, for all retirements o"er
+s. ==========. #etermine that proper cost and
accumulated depreciation were remo"ed from the
boo&s and that proper authoriation to dispose was
obtained.
1.4 (btain a copy of Board?s appro"al for disposals or
co"er in co"ering letter as a condition for signature of
auditors? report.
1.9 %$amine and scan the rele"ant supporting subsidiary
ledger or other similar records to ensure that all
dispositions!transfers o"er a listing scope are properly
recorded.
1.; (btain listings of any abandoned assets or any assets
destroyed!theft during the year. %nsure that in case of
early termination of lease for such assets, any
gain!loss has been adequately accounted for.
1.< Tie the cost total to the summary analysis and the
totals for accumulated depreciation, depletion and
amortiation.
1.'> 2nquire about any related party sales and cross refer
the disposition with transaction with related parties.
AUDIT PROGRAM
CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
1.'' @ith respect to transaction with related party ensure
that requirements of .+( 44 dated Aanuary **, *>>-
are complied with.
(. De)reiati$n
3.' %$amine the company?s procedures for re"iewing the
useful life and carrying "alue of property, plant and
equipment and note down any action ta&en by the
management for change in the estimate of the useful
life of the asset and carrying "alue.
3.* 5a"e client prepare a predicti"e test of depreciation
e$pense. Compare to actual and in"estigate significant
differences. Compare e$pense to prior year.
3.- As per requirement of T+,'' of 2CA:, ensure that the
rate of depreciation of seasonal nature assets is
determined by ta&ing into account the useful life
based on such operations and such rate ! amount of
depreciation is not adjusted to commensurate with the
length of seasonal operations in an accounting period.
3.1 Compare the pro"ision for depreciation, depletion and
amortiation, by class of property, with comparable
amounts for prior periods and with budgeted amounts
for the current period. 2n"estigate significant or
unusual fluctuations after considering the effects of
additions, retirements and fully depreciated assets.
3.3 Compare the ratio of the pro"ision for depreciation,
depletion and amortiation to total cost of property,
plant and equipment with comparable ratios for prior
periods and with industry a"erages. 2n"estigate
significant or unusual fluctuations.
3.4 #iscuss with appropriate client personnel the
accounting estimates that affect accumulated
depreciation, depletion and amortiation. Consider the
acceptability of the stated policies. B%"aluate any
changes in estimates as to whether they are reasonable
or otherwise require disclosure in the financial
statementsC.
3.9 %"aluate whether e$isting policies accomplish the
objecti"e of allocating property costs equitably o"er
their remaining useful li"es.
AUDIT PROGRAM
CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
3.; 5a"e the client prepare a summary analysis of acti"ity
in each significant accumulated depreciation,
depletion and amortiation account for the current
period. Derify the clerical accuracy of the analysis.
3.< Trace beginning balances to the wor&ing papers for
the prior period and tie ending balances to the general
ledger control accounts.
3.'> Cross,reference the pro"isions for depreciation,
depletion and amortiation to the appropriate lead
schedules and ensure that allocations of pro"isions
between cost of sales and operating e$penses are
reasonable and consistent in relation to the preceding
period. Also obtain!enquire into basis of allocation to
determine its adequacy.
3.'' +elate any accumulated depreciation, depletion or
amortiation remo"ed from the accounts during the
period to tests of property dispositions.
3.'* Compare the balances of accumulated depreciation,
depletion and amortiation at the end of the period
with the totals reflected in the subsidiary ledgers or
other supporting records. %$amine support for
significant or unusual reconciling items.
.cope!.ample: / 0
3.'- .elect sample of property items from the supporting
subsidiary records and test the computation of the
depreciation, depletion or amortiation recorded
during the period.
3.'1 Cross,reference the amount of gains or losses due to
property, plant and equipment dispositions during the
period to tests of property dispositions.
3.'3 #etermine whether the total amount of depreciable
property is represented in the client?s depreciation
schedules and ensure that e$cessi"e depreciation
e$pense has not been charged on fully depreciated
assets /in case of straight line depreciation method0.
*. I+)air+ent
4.' +e"iew and discuss with the management the
procedure for identifying indicator of possible assets
impairment and consider performing test of
impairment and communicating and acting on
decision to dispose off assets.
4.* #etermine the reasonableness of management?s test of
impairment including its estimates of undiscounted
cash flows.
AUDIT PROGRAM
CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
4.- #etermine whether any idle, under utilied, poorly
performing or obsolete asset e$ists and consider
whether client has made appropriate write down of
assets in this regard and assets are carried at their fair
"alues.
4.1 2n accordance with the treatment en"isaged in 2CA:
T+,'', ensure that any abandoned fi$ed assets or
assets not to resume operations are remo"ed from
operational fi$ed assets and are recorded separately.
4.3 Analytically re"iew the cost center wise sales with the
preceding year sales figures and in"estigate the
reasons for significant decrease and relate it to the
re"enue generating assets of the concerned
department as an indication of any impairment
in"estigate in detail, the reason thereof.
4.4 Consider whether repairs and maintenance
e$penditures are of such magnitude that an inquiry
should be made as to the need for write downs of the
related equipment maintenance has led to
deterioration or shortened useful li"es of property.
Other tests as &ee+e& neessary
,ana-e+ent Letter
:repare management letter points including:
2nternal control wea&nessesE
Business impro"ement opportunitiesE
7egal non,complianceE
Accounting system deficienciesE and
%rrors and irregularities not material at the
financial statements le"el.
Disl$s.re
%nsure appropriate disclosure in accordance with the
reporting framewor& and fill rele"ant portion of
)inancial .tatement #isclosure Chec&list /).#C70.
S.)ervisi$n/ revie! an& $nl.si$n
AUDIT PROGRAM
CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
'. :erform .enior re"iew and super"ision.
*. +esol"e .enior re"iew points.
-. +esol"e :artner and 8anager re"iew points.
1. Conclude response to the audit objecti"es.
AUDIT PROGRAM
CLIENT: ______________________________________________
PERIOD: ______________________________________________
SUBJECT: ASSETS SUBJECT TO FINANCE LEASE
Est.
Hrs
.
Phase/
Level
Procedures
!P
Re". B#
Co$$e%ts!E&'()%)t*o%
s
A.&it $nl.si$n
Based on the substanti"e test procedures, 2!we performed as outlined abo"e, it is my!our opinion that the audit objecti"es set forth at
the beginning of this audit program ha"e been achie"ed, e$cept as follows:
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Date0111111111111 Si-nat.re J$2 Inhar-e ,ana-er Partner

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