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AUDIT PROGRAM

CLIENT: ____________________________________________________

PERIOD: ____________________________________________________
SUBJECT: CAPITAL WORK-IN-PROGRESS
Est.
Hrs
.
Phase/
Level
Proce!res
W"P
Re#. B$
Co%%e&ts"E'()*&*t+o&
s
AUDIT OBJECTIVES
To determine whether:
A. Capital work-in-progress represents all tangible assets
owned or held under finance lease that are intended to
be used in the entity's operations are under
construction or installation phase or have not yet been
put into operation and they are properly recorded at
cost on a consistent basis.
B. Additions to capital work-in-progress during the audit
period are proper capital charges and represent all
actual physical property to be installed or constructed.
C. The costs applicable to all transfers to operating fied
assets!assets sub"ect to finance lease!investment
property have been properly removed from capital
work-in-progress and have been transferred to
respective assets.
#. Capital work-in-progress has not been imposed by any
material factor.
SUBSTANTIVE PROCEDURES
1. Overall Analytial Revie!
$.$ %btain an analysis of activity in the construction-in-
progress accounts& by pro"ect or appropriation& for the
current period. 'nclude the balances at the beginning
and end of the period& additions& transfers and other
dispositions.
$.( Cross-reference the total activity to the summary
analysis for the period.
$.) *or significant pro"ects or appropriations suspended&
cancelled or delayed during the period& review the
related circumstances and evaluate the effect on
reali+ability or recoverability of costs incurred.
$., -eview cash flow pro"ections or budgets and& through
discussions with appropriate client personnel&
determine whether the client has identified ade.uate
resources to complete the pro"ect or appropriation.
". A##iti$ns
(.$ -eview the description of additions overall& noting
whether they represent capitali+able costs.
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AUDIT PROGRAM
CLIENT: ____________________________________________________

PERIOD: ____________________________________________________
SUBJECT: CAPITAL WORK-IN-PROGRESS
Est.
Hrs
.
Phase/
Level
Proce!res
W"P
Re#. B$
Co%%e&ts"E'()*&*t+o&
s
(.( -eview appropriate approval documentation to ensure
that additions are not made to unauthori+ed pro"ects or
to pro"ects for which the approval limit has been
eceeded.
(.) /elect a sample of pro"ects or appropriations for
testing and have the client prepare a schedule
detailing the charges for those selected.
/cope!/ample: 0 1
(., Trace the charges to the construction-in-progress
subsidiary ledger or similar record that accumulates
charges and credits to individual pro"ects or
appropriations.
(.2 'nspect critical forms and documents supporting a
sample of charges to the pro"ect. /cope!/ample: 0
1
(.3 -eview the total charges for the pro"ect to date for
reasonableness by reference to contracts with
contractors& published statistics on costs of
construction& the client's prior eperience with similar
additions& insurance or appraisal reports& architect's
certificates or other appropriate sources.
(.4 -eview the propriety of the methods used to capitali+e
interest costs during the construction period and
determine whether they are consistent with the
methods used in the prior period. 5valuate the
propriety of the time period for which interest was
capitali+ed and the interest rate used6 recompute the
amount capitali+ed. 5nsure that capitali+ation does not
result in asset carrying values in ecess of the
recoverable value of the property. 7articularly ensure
compliance of 'A/-().
(.8 -eview the propriety of the methods used to capitali+e
overhead during the construction period and
determine whether they are consistent with the
methods used in the prior period. 5valuate the
propriety of amounts capitali+ed.
(.9 -eview the propriety of the method used for
allocation of echange loss and check whether it has
been applied consistently. 5nsure compliance of 'A/-
() and relevant provisions of the Companies
%rdinance& $98,.
(.$: *or simultaneous construction of two assets e.g.& plant
and colony& allocate the soft costs including
unallocated ependitures to assets capitali+ed in
proportion to total amount of directly attributable
cost ! hard costs
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AUDIT PROGRAM
CLIENT: ____________________________________________________

PERIOD: ____________________________________________________
SUBJECT: CAPITAL WORK-IN-PROGRESS
Est.
Hrs
.
Phase/
Level
Proce!res
W"P
Re#. B$
Co%%e&ts"E'()*&*t+o&
s
(.$$ 5nsure that depreciation on construction e.uipments
used for capital work-in-progress is allocated !
capitali+ed in this head instead of charging it off.
(.$( 7hysically observe significant pro"ects or
appropriations in process at the end of the period&
noting that the physical characteristics appear to be
consistent with the description in the authori+ing
documentation and that the estimated stage of
completion appears reasonable.
(.$) *or self constructed assets ensure that the ependiture
incurred during construction phase has been classified
and segregated among formation& direct pro"ect cost&
indirect cost& as per the re.uirement of T--(: of 'CA7
and further ensure the accounting treatment as
follows:
*ormation costs like preliminary epenses are
charged off not eceeding five years
commencing from the financial year in which it
was first incurred.
#irect pro"ect costs like import duties& clearing
and ;C epenses& sight preparation cost&
installation cost are capitali+ed.
'ndirect costs like general and administration
epenses& operation and maintenance cost& loss
on trial runs& etc. are allocated to building and
plant and machinery in proportion to their
respect cost.
%. Trans&ers
).$ *or pro"ects or appropriations completed during the
year& determine whether there was a proper cutoff of
the capitali+ation of interest and overhead and
whether all related costs were transferred to the
property accounts 0note propriety of classification1
and considered for depreciation on a timely basis.
).( %btain completion certificates for all transfers during
the audit period either from the outside
contractors!consultants or internal engineering
department.
).) -eview subse.uent to year-end transfers and consider
whether these were complete as at the balance sheet
date or not.
)., 5nsure that the depreciation charge has commenced
on all assets capitali+ed during the period according to
the Company<s policy.
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AUDIT PROGRAM
CLIENT: ____________________________________________________

PERIOD: ____________________________________________________
SUBJECT: CAPITAL WORK-IN-PROGRESS
Est.
Hrs
.
Phase/
Level
Proce!res
W"P
Re#. B$
Co%%e&ts"E'()*&*t+o&
s
'. Val(ati$n
,.$ Consider whether the costs are reali+able or
recoverable.
,.( *or significant pro"ects& confirm with outside
contractors amounts due or progress payments made
and other pertinent terms relative to the construction
contract.
Other tests as #ee)e# neessary
*ana+e)ent Letter
7repare management letter points including:
'nternal control weaknesses6
Business improvement opportunities6
;egal non-compliance6
Accounting system deficiencies6 and
5rrors and irregularities not material at the
financial statements level.
Disl$s(re
5nsure appropriate disclosure in accordance with the
reporting framework and fill relevant portion of
*inancial /tatement #isclosure Checklist 0*/#C;1.
S(,ervisi$n- revie! an# $nl(si$n
$. 7erform /enior review and supervision.
(. -esolve /enior review points.
). -esolve 7artner and =anager review points.
,. Conclude response to the audit ob"ectives.
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AUDIT PROGRAM
CLIENT: ____________________________________________________

PERIOD: ____________________________________________________
SUBJECT: CAPITAL WORK-IN-PROGRESS
Est.
Hrs
.
Phase/
Level
Proce!res
W"P
Re#. B$
Co%%e&ts"E'()*&*t+o&
s
A(#it $nl(si$n
Based on the substantive test procedures& '!we performed as outlined above& it is my!our opinion that the audit ob"ectives set forth at
the beginning of this audit program have been achieved& ecept as follows:
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Date.//////////// Si+nat(re J$0 Inhar+e *ana+er Partner
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