[Checklist] for Verification of Items of Property, Plant & Equipment to be followed by the Auditor

The verification process for PPE involves reviewing associated records and conducting a physical examination. Typically, the auditor verifies the records by referring to documentary evidence and assessing internal controls. On the other hand, the responsibility of physically verifying the PPE lies mainly with the management. In addition, the auditor needs to take into account the suitability of the accounting policies, which involves determining which expenses are eligible for capitalization, and whether a cost or valuation model is utilized. It is the responsibility of the auditor to verify that the entity has capitalized the assets in accordance with the component approach, which requires separating and capitalizing a component or portion of an asset that has a significant value compared to the total value of the asset or has a different useful life than that of the asset. To ensure that no significant items are overlooked, auditors often use a checklist of items to verify. In this context, we have discussed a checklist for auditors to verify items of Property, Plant & Equipment.

I. Whether the auditor has verified the opening balances of the existing PPE from records such as the schedule of PPE, ledger or register balances?

II. Has the auditor verified the Capital work in progress (CWIP) with reference to the underlying contractor bills, work orders, certification of work performed by independent persons, comparison of the progress and the costs incurred up-to-date with the budgets, capital asset management policy and plan, pending commitments, etc.?

III. Has the auditor specifically verified the date on which the assets are moved from the CWIP account to the fixed assets so that the depreciation on fixed assets can be computed correctly?

IV. Has the auditor specifically verified the self-constructed PPE and improvements thereto with reference to the supporting documents such as contractors’ bills, work-order records, installation certification, completion certificates and independent confirmation of the work performed?

V. Whether the auditor has satisfied that PPE have been valued in accordance with the generally accepted bases of accounting and as per the applicable reporting framework?

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