Final answer:
In auditing fixed asset accounts, the auditor's goal is to ensure the accuracy and existence of recorded assets. The auditor achieves this by using a combination of verifying beginning balances, vouching book values to supporting documents, emphasizing year-end tests, and tracing transactions from receipt to recording.
Step-by-step explanation:
Auditing Fixed Assets
When auditing a fixed asset account such as land, buildings, and equipment, the auditor will normally use a combination of agreeing beginning balances to prior year working papers and then testing transactions during the year. This includes vouching the book value of fixed assets to underlying purchase documents to verify the accuracy of the initial recording of the asset and understanding the transactions behind it.
In practical terms, it includes the following processes:
Vouching: Auditors verify the book values against the original purchase invoices, deeds, or other documentation to ensure that fixed assets are properly recorded at cost and still exist.
Year-End Tests: They place significant emphasis on testing balances at year-end to confirm the valuation and status of fixed assets.
Receiving Documents: Tracing transactions from receiving documents to recording of the purchase ensures that each asset was actually received and appropriately recorded.
Agreeing Balances: They compare beginning balances to prior year working papers to confirm continuity and to review any changes made during the year.