INTERNAL CONTROL OF
PROPERTY, PLANT, AND
EQUIPMENT (FIXED
ASSET)
By:
1. Sesilia Wulan S / 3203016008
2. Abigail Veronica G S / 3203016011
3. Tiffany Wijaya / 3203016044
4. Cindy Indriyo / 3203016045
INTRODUCTION
Assets with useful life greater than
Why internal control is important for
one reporting period, purchased for
the company?
long term-use, and are not likely to
converted quickly into cash
PROPERTY, PLANT,
AND EQUIPMENT
(FIXED ASSET)
A primary key resource for businesses
and can represent a significant How the company implemented the
section of the net worth captured on internal control and test of control for
the balance sheets each internal control?
DETAILS OF TASK
The following types of internal control are commonly used by organizations for
property, plant, and equipment :
1. A fixed asset master file is maintained with a separate record for each fixed asset
2. Written policies exist and are known by accounting personnel to differentiate
between capitalizable additions, freight, installation costs, replacements, and
maintenance expenditures
3. Depreciations charges for individual assets are calculated for each asset; recorder
in a fixed asset master file that includes cost, depreciation, and accumulated
depreciation for each asset; and verified periodically by an independent clerk
4. Acquisitions of fixed assets in excess of $20,000 are approved by the board of
directors
5. When practical, equipment is labeled with metal tags and is inventoried on a
systematic basis
DETAILS OF TASK
a. State the purpose of each of the
internal controls just listed. The answer
should be in the form of the type of
misstatements that is likely to be
reduced because of the control
QUESTIONS
b. For each internal control, list one of
test control the auditor can use to test
for its existence
The purpose for each internal control ANALYSIS (A)
No. Internal Control Purpose
1. A fixed asset master file is maintained with a separate record for To reduce the misstatements when
each fixed asset recording asset
2. Written policies exist and are known by accounting personnel to To minimize misstatement of accounting
differentiate between capitalizable additions, freight, installation classification for fixed asset
costs, replacements, and maintenance expenditures
3. Depreciations charges for individual assets are calculated for each To minimize depreciation calculation and
asset; recorder in a fixed asset master file that includes cost, recording misstatement and verification to
depreciation, and accumulated depreciation for each asset; and ensure the existence of the asset
verified periodically by an independent clerk
4. Acquisitions of fixed assets in excess of $20,000 are approved by the To minimize purchase that has been done
board of directors without any authorization
5. When practical, equipment is labeled with metal tags and is To control the asset and minimize the
inventoried on a systematic basis potential of loss of the asset
Test of control from each internal control that auditor can use for
its existence ANALYSIS (B)
No. Internal Control Purpose
1. A fixed asset master file is maintained with a separate record for Verify that master file exizts and is used
each fixed asset
2. Written policies exist and are known by accounting personnel to Verify that written policies exist
differentiate between capitalizable additions, freight, installation
costs, replacements, and maintenance expenditures
3. Depreciations charges for individual assets are calculated for each Examine records for indication of periodic
asset; recorder in a fixed asset master file that includes cost, verification of master file
depreciation, and accumulated depreciation for each asset; and
verified periodically by an independent clerk
4. Acquisitions of fixed assets in excess of $20,000 are approved by the Examine a sample of purchase invoices of
board of directors fixed assets in excess of $20.000 for Board
of Directors approval
5. When practical, equipment is labeled with metal tags and is Examine the company’s physical count of
inventoried on a systematic basis equipment that compares tags on the
equipment to records of tags
CONCLUSION
Internal control’s intends to protect a company especially from financial
risks. Internal control’s assure that company basics remain operationally
effective and efficient. With internal controls, activities in company can be
controlled and can make the company to be a competent. So, the five internal
control above are used to reduce a misstatement of account amount,of
accounting classifications, in the calculation and record of depreciation, reduce
a fraud about kind purchase because can affected the calcualation of the fixed
asset, and help the company to control the assets. In internal control, the
auditors do some verification and examine because the auditor must to ensure
if that internal control for their company activities is suitable with existing
regulation and well implemented. Without a verification dan examine from
auditor, the internal control it will be not realized as well for the company.
