Page 317 - Accounting Information Systems

288 PART II Transaction Cycles and Business Processes

FI G U RE
6-16 FIXED ASSET DEPRECIATION REPORT

OZMENT’S INDUSTRIAL SUPPLY
DEPRECIATION CALCULATIONS LISTING THROUGH
6/30/07 POSTED AS BATCH #1327
Depn.
Code Method Description Expense
100 SL 5 yr COMPUTER SYSTEM 3,600.00
200 SYD 5 yr OFFICE FURNITURE 694.44
300 DDB 5 yr SNOWBLOWER 133.33
400 SL 3 yr DELIVERY TRUCK 0.00
500 SL 3 yr DELIVERY TRUCK 0.00
600 SL 3 yr TRUCK 2,333.31
Assets listed: 6 Total 6,761.08

GL summary:
615 DEPRECIATION 6,761.08
EXPENSE
151 ACCUM DEPN. 6,761.08
EQUIPMENT

Independent Verification Controls
Periodically, the internal auditor should review the asset acquisition and approval procedures to determine
the reasonableness of factors used in the analysis. These include the useful life of the asset, the original fi-
nancial cost, the proposed cost savings as a result of acquiring the asset, the discount rate used, and the
capital budgeting method used in the analysis.
The internal auditor should verify the location, condition, and fair value of the organization’s fixed
assets against the fixed asset records in the subsidiary ledger. In addition, the automatic depreciation
charges calculated by the fixed asset system should be reviewed and verified for accuracy and complete-
ness. System errors that miscalculate depreciation can result in the material misstatement of operating
expenses, reported earnings, and asset values.

Summary

The chapter began with an examination of payroll procedures. The second section of the chapter presented the typical
The discussion focused on fundamental tasks; the functional features of the fixed asset system. Fixed asset accounting
departments; and the documents, journals, and accounts that involves three classes of procedures: asset acquisition, asset
constitute the payroll system. Common exposures and controls maintenance, and asset disposal. We examined the files, pro-
that reduce risks inherent in payroll activities were explained. cedures, and reports that constitute the fixed asset system.
In addition, we reviewed the operational features and the con- We concluded our discussion by reviewing the principal risks
trol implications of technology used in payroll systems. and controls in the system.