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Control objectives

The control objectives are to ensure that:
(i) Non current assets are correctly recorded, adequately secured and properly maintained
(ii) Acquisitions and disposals of non current assets are properly authorized
(iii) Acquisitions and disposals of non current assets are for the most favorable price possible
(iv) Non current assets are properly recorded, appropriately depreciated, and written down where necessary.

Control Procedures over Non Current Assets:

(i) Annual capital expenditure budgets should be prepared by someone directly responsible to the board of
(ii) Such budgets should, if acceptable, be agreed by the board and put in the minutes.
(iii) Applications for authority to incur capital expenditure should be submitted to the board for approval
and should contain reasons for the expenditure, estimated cost, and any non current assets replaced.
(iv) A document should show what is to be acquired and be signed as authorized by the board or an
authorized official.
(v) Non current assets manufactured or constructed by the company itself should be separately identifiable
in the company's costing records and should reflect direct costs plus relevant overhead but not
include any profit. This might apply where, for example, a building company constructs its own office
(vi) Disposal of non current assets should be authorized and any proceeds from sale should be related to the
(vii) A register of non current assets should be maintained for each major group of assets. The register
should identify each item within that group and contain details of cost and depreciation.
(viii) A physical inspection of non current assets should be carried out periodically and checked to the non
current asset register. Any discrepancies should be noted and investigated.
(ix) Assets should be properly maintained and adequately insured.
(x) Depreciation rates should be authorized and a written statement of policy produced.
(xi) Depreciation should be reviewed annually to assess the need for changes in the light of profits or losses
on disposal, new technology etc.
(xii) The calculation of depreciation should be checked for accuracy.
(xiii) Non current assets should be reviewed for the need for any write-down.


(i) Check authorization of purchase to board minutes, capital expenditure budgets and capital expenditure
(ii) Check authorization for disposals of significant assets.
(iii) Confirm existence of non current asset register which adequately identifies assets and comments on
their current condition. Ensure register reconciles to nominal ledger.
(iv) Test evidence of reconciliation of register to physical checks of existence and condition of assets.
(v) Check authorization of depreciation rates, and particularly changes in rates.
(vi) Examine evidence of checking of correct calculations of depreciation.


The testing of controls is established whether they are working effectively. So, by this stage, the auditor will
know whether a

systems approach

is to be used - focusing on the accounting systems supplemented by a
reduced amount of substantive testing, or a

verification approach

with full substantive testing.

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