[Checklist] Audit of Property, Plant and Equipment (PPE)

PPE normally constitutes a significant portion of the total assets and hence, an audit of PPE is considered to be more significant. An auditor is responsible for the verification of compliance with the accounting principles and other legal provisions applicable to the entity in respect of PPE. One may adopt the following checklist for audit of PPE:

1. Understood the client and its environment to consider inherent risk, including fraud risks, related to PPE?

2. Assessed the risks of material misstatement and designing of tests of controls and substantive procedures covering the following aspects:

a) Existence of PPE

b) Completeness of recorded PPE

c) Rights of recorded PPE

d) Valuation of PPE

e) Correctness of classification of PPE

3. Verified the correctness of depreciation calculation?

4. Assessed the potential misstatements in PPE on account of frauds and errors like the purchase of an asset at an inflated price especially from a related part, expenditures for repairs and maintenance recorded as PPE, or vice versa, wrong write-off of the asset as scrap, obsolescence, missing, etc.?

5. Reviewed the system of internal controls relating to PPE?

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