Fixed Assets Audit Checklist

Add to the PBC list (via Suralink or TaxDome): the fixed asset register at period-end, the prior-year register, and a roll-forward showing additions, disposals, and depreciation by class. Also request the capitalization policy memo and any board minutes approving major CapEx.

Document performance materiality for the fixed asset cycle in the audit workpaper. Most SMB engagements set FA-cycle PM at 50–75% of overall PM; for asset-heavy clients (manufacturing, real estate), tighten further. The threshold drives sample size for additions testing and the floor for impairment indicators review.

Stratify the register by asset class (buildings, leasehold improvements, machinery, vehicles, IT equipment, furniture). Concentrate substantive testing on classes representing >10% of net book value. Document the stratification in the lead schedule.

Reconcile total cost and total accumulated depreciation per the FA register to the GL fixed-asset and accumulated-depreciation accounts. Differences over the de minimis threshold need a reconciling-items schedule with client explanation. Common cause: assets retired in the sub-ledger but not journalized in the GL.

For each reconciling item over the de minimis: trace to source documents and propose an AJE if warranted. Document the cause (timing, retirement not posted, manual JE bypassing the sub-ledger). Add to the summary of unadjusted differences if client refuses to book.

Standard format: opening balance + additions − disposals = ending balance, by asset class, for both cost and accumulated depreciation. Tie the opening balance to PY signed financials, not just the PY workpaper. Cross-reference each column to its supporting workpaper (additions testing, disposals testing, depreciation recalc).

Select a sample stratified by asset class and NBV. Cover all individually-material assets plus a haphazard sample below the threshold. Test direction: register → floor (existence). Reverse direction (floor → register) tests completeness and is run separately.

Photograph each asset, record the asset tag number, and note physical condition. Idle or visibly deteriorated assets are impairment indicators — flag for the impairment review. For multi-location clients, coordinate with component auditors or use video walkthroughs with date/time stamps.

Investigate any sampled asset not located: confirm it wasn't retired without journalizing, transferred between locations, or stolen. Quantify the NBV exposure and propose a write-off AJE if recovery is not substantiated. Repeated unlocated assets indicate a control deficiency in the asset-tagging process.

For each sampled addition: agree cost to vendor invoice, verify three-way match (PO + receiving + invoice), and confirm board or delegated approval per the CapEx authorization matrix. Capitalize freight, installation, and sales tax; expense training and routine maintenance.

Scan the repairs-and-maintenance GL for items over the capitalization threshold (commonly $2,500–$5,000 per the de minimis safe harbor). Misclassified expenses inflate R&M and understate assets. Common find: bundled invoices for software + implementation expensed in full when implementation should be capitalized.

Under ASC 842 nearly all leases >12 months recognize a ROU asset and lease liability. Verify the client has a complete lease inventory (including embedded leases in service contracts), tested classification (finance vs. operating), and used a defensible incremental borrowing rate. Common gotcha: month-to-month renewals defaulted to short-term when the renewal is reasonably certain.

Construction-in-progress balances should not depreciate. Confirm CIP balances reflect open projects and trace any project marked complete in the period to its placed-in-service memo and first depreciation entry. Stale CIP (no activity 12+ months) is an impairment indicator.

Run an independent recalc in Excel using cost, salvage, useful life, and method per asset class. Tie total to the depreciation expense GL account. Differences typically come from mid-month vs. half-year conventions, or from disposed assets still depreciating in the sub-ledger.

Per ASC 250-10, changes in useful life or salvage are changes in estimate (prospective). Confirm any change has a documented rationale (engineering study, manufacturer guidance, history of repairs) and that the disclosure includes the effect on current-period depreciation.

Tie book depreciation per the FA system to tax depreciation per Form 4562 and confirm the M-1 / M-3 difference flows to deferred taxes. Bonus depreciation phase-down (80% in 2023, 60% in 2024, 40% in 2025) is a frequent reconciliation error.

For each disposal: agree proceeds to bill of sale or scrap receipt, recompute gain/loss (proceeds − NBV at disposal date), and confirm both cost and accumulated depreciation were removed from the register. Disposal of fully-depreciated assets still requires sub-ledger removal even when there's no P&L impact.

Triggering events: significant decrease in market value, adverse change in use, physical damage, accumulated costs exceeding original estimates, current-period operating losses combined with history of losses. Document the indicator review even if no impairment is found — the absence of documentation is itself an audit finding.

If indicators are present: review management's undiscounted-cash-flow recoverability analysis at the asset-group level. If the test fails, evaluate the fair-value measurement (Level 1/2/3 inputs, valuation specialist's report). Confirm the impairment loss is recognized in the period and disclosed per ASC 360-10-50.

Walk a CapEx requisition from origination through approval, PO, receipt, asset tagging, and capitalization. Note the approval thresholds (manager, controller, CFO, board) and test one transaction at each tier. Document segregation between the requester, approver, and asset-tagging function.

Compare the insurer's scheduled property to the FA register: significant uninsured assets are a going-concern and management-letter item. Coverage based on NBV instead of replacement cost is a common underinsurance pattern.

Summarize procedures performed, exceptions found, AJEs proposed, items added to the summary of unadjusted differences, and any deficiencies for the management letter. Conclude on each assertion (existence, completeness, valuation, rights, presentation).

Senior signs as preparer; manager signs as reviewer; partner signs after clearing review notes. Lock the workpaper in Caseware or CCH ProSystem fx Engagement. Outstanding review notes block engagement-quality-review release.