Cambridge University Press India Pvt. Ltd.

RACM: Procurement and Management of Fixed Assets

Process Owner: AGM-Finance

FA-01

FA-02

Procurement of Policies & Procedures

Fixed Asset

Planning

Classifcation

Cut-of

Accuracy

Sub process

Completeness

Process

Occurrence

Control No

Assertions about
classes of
transactions and
events for the
period under audit
(Statement of Proft
and Loss Accounts):

FA-03

FA-05

FA-06

FA-07

FA-08

FA-04

Vendor Selection &

Creation

FA-09

Invoice Receiving and

Verifcation

FA-10

Payment to Vendor

FA-11

FA-12

FA-13

FA-14

Management of Recording of Fixed Assets

Fixed Assets in FAR and Books of
accounts (Including
Reconciliation of Both)

FA-15

FA-16

FA-17

FA-18

FA-19

FA-20

FA-21

FA-22

FA-23

FA-24

Depreciation/Amortization r
expense

FA-25

FA-26

FA-27

FA-28

Sale of Fixed Assets

FA-29

FA-30

Insurance of Fixed Assets

Accuracy & valuation

Classifcation and
Understandability

Completeness

Occurrence and
Rights and
Obligations

Valuation &
Allocations

Completeness

Rights and
Obligations

Existence

Assertions about
account balances
at the period-end
(Balance sheet
accounts):
Assertions about
Presentation And
Disclosure

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Risk Identifcation is done on the basis of

Process Mapping so CUPIPL Team is
requested to go through with the same and
suggest any other material risk if present.

Identifcation of Risk of Material

Misstatement
("What Could Go Wrong")
Risk of
Material
Misstatement
Due to Fraud?

Risk Description

- No SOP
- No SOD/DOA defined in SOP
- SOP not valid, signed and approved by
authorised person
- Proper Communication of SOP not made

NO

NO
- Wrong Quantity determined/informed for
Purchase
- Wrong Item determined/informed for Purchase
- CAPEX expenditure exceeding than Budget

- Non Generation of Indent (When it is required

to be raised)

NO

- Indent raised (when it is not required to be

raised)
- Incomplete or Wrong Indent raised in terms of
wrong qty/wrong description/wrong
vendor/wrong amount
(Changes in proposed/original indent not
documented)
YES
- No Compliance Process done for
Supplier/Vendor or improper Compliance Process
done

Yes
Inadequate vendor Selection Process
- Actual or perceived favouritism in providing
information
- Actual or perceived breach of confidentiality
leading to mistrust by tenderers leading to
Claims of bias and favouritism to organisations
or individuals
- L1 vendor not selected when the same is to be
selected (or reasons for not selecting L1 vendor
are not appropriate)

- Incomplete/Wong PO raised
(In respect of wrong quantity/amount/wrong
vendor/wrong address/wrong description)
- Changes in proposed/original PO not
documented

NO

- Monitoring of Pos (Or indents) not done at all

due to which Open Pos could not e tracked on
required time.

NO

- Not reviewing old Pos before creating new POs NO

Ending up by creating excess working capital.
Collusion with a vendor who has an old PO still
New Pos are raised and payments are done.

- Invoices not received but recorded in

accounting software.
- Invoices received but not recorded in
accounting software.
- Wrong Invoices recorded in accounting
software.

Yes

- Payment released before completion of credit

period (favourism to vendor)
- Delayed payment leading to dissatisfaction
among vendors

YES

- Wrong Payment processed (To wrong Vendor or Yes

Wrong Amount)
- Payment not authorized

- Payment not recorded in accounting software

or recorded when no payment was done
- Wrong Payment recorded (At incorrect
amount/vendor)

No

- Acknowledgement not received from the

vendor after payment

No

- FAR not maintained /improperly maintained/not No

updated
or additions not recorded when Fixed Assets
exist

- Additions are recorded for fixed assets that do No

not exist
- Additions are recorded when the entity does
not have legal title to the fixed assets
- Additions are recorded at the incorrect amount

No
- Expenditures of a non-capital nature (e.g.,
repairs and maintenance) have been incorrectly
capitalised.
- Subsequent improvements made to fixed
assets (e.g., remodels, additions) are incorrectly
expensed.

- Operating leases for fixed assets are incorrectly No

accounted for as finance leases or Finance
leases for fixed assets are incorrectly accounted
for as operating leases.

- Additions recorded in wrong accounting period NO

- Fixed assets stated in the general ledger does No

not reconcile to the subsidiary ledger and/or the
reconciliation contains invalid items.

- The valuation methodology used for valuation No

of Fixed Assets purposes is:
Inappropriate under the circumstances
Based on underlying significant assumptions
[specify assumptions] that are inappropriate,
lack sufficient basis, or lack sufficient support.
- Impairment indicators may exist for fixed
assets, but are not known to management.
'Cash flow projections or significant assumptions
used in the impairment test are inconsistent with
cash flow projections or significant assumptions
used for other purposes (e.g., going concern,
deferred tax asset, fixed asset impairment).

- Capitalised interest is:

Inappropriately recorded for assets directly
purchased and put into service
Not recorded for assets constructed/recorded
when asset not constructed
Recorded at the incorrect amount.

No

- Access/Details of Fixed Assets (Like

Laptops/Mobile Phones) not recorded/not
updated/wrongly recorded)
Transfer of Fixed Assets (From one place to
another) not recorded/wrongly recorded

No

- FAR and Books of accounts (In tally) are not

matching

No

- Wrong Depreciation expense/amortzation is

calculated using an inappropriate rate or using
an inappropriate methodology
(Depreciation not calculated on the basis of
useful life a sper Companies Act 2013)

No

No
- Depreciation expense is not calculated for all
fixed assets (Amortization not done)
- Depreciation expense is calculated for assets of
a non-capital nature or for assets that have been
disposed.

- Wrong Depreciation is recorded/ Recorded at

the incorrect amount

No

- The sale, disposal, or theft of fixed assets has

not been recorded when assets are sold.

No

- The entity incorrectly records the disposal of

fixed assets for assets still owned by the entity.
- The disposal of assets have been recorded
incorrectly in books of accounts.

No

- Profit/loss wrongly recognised/recorded on

disposal of Fixed Assets

No

Proper insurance coverage has not been taken on Fixed

No
Assets or the same has been accounted properly in books of
accounts.

Control Description has been defned

below against each identifed risk (Refer
Q Column) on the basis of Process
Mapping So CUPIPL Team is requested
to validate the same and in case of any
changes in the defned control kindly
inform us the same.

Control That Addresses Risk of Material

Misstatement
Control Description

Written SOP defined at Global level and SOP

has been defined at national level also
covering SOD/DOA.
SOP valid, signed and approved by
Authorized person.
Has been mailed and communicated to
concerned ones.

Key Control / NonKey Control

Control
Automated?

KC

No

CAPEX Approval Form has been defined which KC

is approved by HOD and then Finance
Personnel after considering the Budget Factor
allows the purchase of Fixed asset.

No

KC

No

KC
100 % Due Diligence Process is done for
vendors/suppliers or purchases are done on
PO Basis only and documents are maintained
for the same.

No

KC
In every case quotations are taken/ due
diligence process present/ vendor selected on
the basis of Lowest cost. (Exceptional on the
basis of quality parameters & time
constraints which are documented).
Compliance process covers estimation Cash
Flow Value and then business is done with the
vendor.
Vendor creation rights are restricted.

No

Approval form has been defined for Capital

Expenditure and the same are raised. After
Approval Form PO Raised by Authorized
Personnel. And then PO approved by
Authorized personnel.

KC

Yes

Pop up to Approving Authorities by system on KC

daily basis for Open Pos.

Yes

KC
Payment made only after receipt of 3
documents viz. PO , Invoice & Confirmation of
Reciept of Goods/Completed Service Order.

No

PO is approved by the authorised personnel

in the system in ERP System only.

KC
- Journal entries to trade payables or Other
Expenses, including period-end payable
accruals, and supporting documentation, are
reviewed and approved by management
- On a periodic basis, management compares
actual results with budgeted and prior-year
amounts; significant and/or unusual
differences are investigated and resolved.

No

KC
At the time of payment, 3 way check is
performed (i.e. PO-Completeed Service OrderInvoice) before payment. Completed matches
are only posted of those vendors included in
the vendor master file.
And
Payment facility has been availed from ICICI
Bank which allows only authorized signatories
to release paymemts.

No

KC
1. Payment facility has been availed from
ICICI Bank which allows only authorized
signatories to release paymemts.
2. At the time of payment, 3 way check is
performed (i.e. PO-Completeed Service OrderInvoice) before payment. Completed matches
are only posted of those vendors included in
the vendor master file.

1. Yes
2. No

KC

No

Payment made only through electronic mode KC

or cheque mode (Cash payments are not
entertained) So Cheque Copy and proofs are
maintained/documented.

No

Bank Statements are reconciled to general

ledger regularly and differences are
invesigated and resolved on timely basis.

KC
FAR Maintained by Finance Personnel in
proper format.
AND
Periodic counts of fixed assets are performed.
Selections are reconciled to the fixed assets
register, verified for existence and ownership,
and agreed to supporting documentation that
legal title is held.

No

A 3-way match process is performed for fixed KC

assets purchases that utilise the purchase
order, receiving document, and vendor
invoice. Once the 3-way match process is
performed and the key terms of the purchase
are verified, a transaction is posted in the
fixed assets sub-ledger and general ledger to
record the addition. Further every
transaction/JV is approved by GM/DGM/AGM.
AND
Periodic counts of fixed assets are performed.
Selections are reconciled to the fixed assets
register, verified for existence and ownership,
and agreed to supporting documentation that
legal title is held.

No

KC

No

Each Journal Enty is reviewed and approved

by Management (Maker Checker Concept)
AND
Recorded capital expenditures and other
expenses are compared to budget regularly;
management investigates and resolves
significant variances.

Non Existent of operating and financial

leases.

KC

No

Each Journal Enty is reviewed and approved

by Management (Maker Checker Concept)
AND
Recorded capital expenditures and other
expenses are compared to budget regularly;
management investigates and resolves
significant variances.

KC

No

Periodic counts of fixed assets are performed. KC

Selections are reconciled to the fixed assets
register, verified for existence and ownership,
and agreed to supporting documentation that
legal title is held.

No

A valuation analysis is performed by qualified KC

personnel (CA) at the entity. The valuation
methodology, significant assumptions, and
underlying data used are reviewed,
evaluated, and approved by management
with appropriate knowledge of valuation
techniques.

No

In case of any doubts, opinions are taken

from third party expert (The Contract has
been signed with the third party expert
regarding the same)

Non Existent of capitalized interest.

KC

No

Access of Fixed Assets maintained and

updated
Trasfer of Fixed asset is possible with the
approval only.

KC

No

A reconciliation is prepared between Tally and KC

Fixed Assets Register to ensure that
additions/ deletions have been accurately
captured.

No

Management reviews fixed assets additions KC

for appropriate assignment of depreciable
lives and methodology, and performs a
periodic review of depreciable lives and
depreciation methodology for all fixed assets
for ongoing appropriateness.

No

Periodic counts of fixed assets are performed.

Selections are reconciled to the fixed assets
register, verified for existence and ownership,
and agreed to supporting documentation that
legal title is held.

KC
Expenditures of a non-capital nature are
reviewed and approved by finance personnel
with knowledge of the entitys capitalisation
policy. Journal entry and supporting
documentation for expenditures of a noncapital nature are reviewed by management
prior to the journal entry being posted.
(Preventative)
AND/OR
Management reviews fixed assets additions
for appropriate assignment of depreciable
lives and methodology, and performs a
periodic review of depreciable lives and
depreciation methodology for all fixed assets
for ongoing appropriateness. (Detective)

No

KC

No

Periodic counts of fixed assets are performed. KC

Selections made from the property, plant,
and equipment register are verified for
existence, and agreed to supporting
documentation that legal title and rights to
the asset are held.

No

KC
All fixed assets disposals and supporting
documentation are reviewed and approved by
management prior to the journal entry being
recorded. (Preventative)
AND/OR
Periodic counts of fixed assets are performed.
Selections made from the floor are reconciled
to the fixed assets register, and differences
are investigated and resolved. (Detective)

No

Management reviews each journal entry and

approval on the same is provided.
(Maker Checker Concept)

KC
All fixed assets disposals and supporting
documentation are reviewed and approved by
management prior to the journal entry being
recorded. (Preventative)

No

Proper insurance coverage has been taken on Fixed

Assets and the same has been accounted properly in
books of accounts. (Not on Laptops as covered under
warranty)

No

KC

Nature of control
(Preventive /
Detective)

Frequency
(Annually, Quarterly, Monthly,
Weekly, Daily, Many Times per
Day, As Needed Transactional)

Control Testing Strategy

Preventive

Transactional

A) SOP covers all aspects

including SOD/DOA and
B) Signed and approved by
Authorized Person.
C) Changes are approved and
documented

Preventive

Transactional

A) CAPEX has been done with

proper approval
B) CAPEX within the budget
(If exceeding budget than
explaination should be there)

Preventive

Transactional

A) CAPEX has been done with

proper approval

Preventive

Transactional

Due Diligence (Including Third

party code of conduct, Risk
Assesment, MSME Declaration
etc.)/
Proper terms and conditions
defined on PO

Preventive

Transactional

(A) Quotations from Vendors,

Comparitive Sheet from vendor,
selection of L1 vendr
(B) Live testing of vendor
creation rights

Preventive

Transactional

(A) Quotations from Vendors,

Comparitive Sheet from vendor,
selection of L1 vendr
(B) Live testing of access control
of PO software

Preventive

Daily

(A) Live testing of access control

of PO software regarding Pop up
system

Preventive

Transactional

Payment done after 3-way check

i.e. PO-GRN-Invoice

Preventive

- Transactional
- Mothly

(A) JV of Purchases & Trade

Payables are properly authorized
by GM/DGM/AGM
(B) Analyse budget vs actual and
check whether expenses in
budget or not

Preventive

Weekly
And
Transactional

(A) Payment released with

proper authorization with
approval on Payment Vouchers
(B) Payment released after
completion of credit period
(C) Accuracy and Correctness of
Payment

Preventive
Preventive

1. Transactional
2. Transactional

(A) Payment released with

proper authorization with
approval on Payment Vouchers
(B) Payment released after 3
-way check
(C) Accuracy and Correctness of
Payment

Detective

Monthly

Payment released properly

recorded in accounting software

Preventive

Transactional

Any Cash/Cheque payments

done are acknowledged with
proof

Detective

Preventive

Preventive

Transactional

ANd

Yearly

Detective

Preventive

Transactional

And

And

Detective

Yearly

Preventive

Transactional

And

And

Detective

Monthly

(A) FAR Maintained by Finance

Personnel in proper format.
(B) Once the 3-way match
process is performed and the
key terms of the purchase are
verified, a transaction is posted
in the fixed assets sub-ledger
and general ledger to record the
addition. Further Every JV of FA
is approved by GM/DGM/AGM
(C) FAR matches with the books
of accounts and PV Report

(A) FAR Maintained by Finance

Personnel in proper format.
(B) Once the 3-way match
process is performed and the
key terms of the purchase are
verified, a transaction is posted
in the fixed assets sub-ledger
and general ledger to record the
addition. Further Every JV of FA
is approved by GM/DGM/AGM
(C) FAR matches with the books
of accounts and PV Report

- Expenditures of a non-capital
nature (e.g., repairs and
maintenance) have been
properly capitalised.
- Subsequent improvements
made to fixed assets (e.g.,
remodels, additions) are
properly expensed.

NA

NA

NA

Preventive

Transactional

(A) Fixed Assets recorded in

current accounting period

And

And

Detective

Monthly

Detective

Yearly

(A) Fixed assets stated in the

general ledger reconcile to the
subsidiary ledger
(B) FAR matches with the books
of accounts and PV Report
(C) Budget vs Actual

Preventive

Yearly

(A) Valuation Methodolgy is

appropriate under the
circumstances & based on
appropriate assumptions

NA

NA

NA

Preventive

Transactional

- List of Access of Fixed Assets

(Like Laptops/Mobile Phones)
recorded accurately
- Transfer of Fixed Assets (From
one place to another) recorded
accurately

Detective
Yearly

Preventive

Monthly

Check FAR and books of

accounts to ensure accuracy and
correctness

Preventive

Monthly

(A) Accuracy and correctness of

depreciation/amortization
expenses at correct
rate/methodology

Preventive

Transactional

And
AND
Detective
Monthly

(A) Accuracy and correctness of

depreciation/amortization
expenses at correct
rate/methodology
(B) Depreciation calculated on
all Fixed Assets correctly

Preventive

Transactional

(A) Accuracy and correctness of

depreciation/amortization
expenses at correct
rate/methodology
(B) Approval on JV of
Depreciation

Detective

Yearly

(A) Sale/Theft/Disposal of Fixed

Assets have been properly
accounted

Preventive
AND
Detective

Transactional
AND
Yearly

(A) Sale/Theft/Disposal of Fixed

Assets have been properly
accounted
(B) Disposal of Fixed Assets
coorectly and accurately
recorded

Preventive

Transactional

(A) Profit/loss properly

recognised on sale/disposal/theft
of Fixed Assets

Preventive

Event Based

A) Appropriateness of insurance
coverage
B) Proper Accounting of Insurance
Coverage

In Process

Document To Be Examined

1. Obtain SOP from Process

Owner/Finance Team

1. JV of purchase of Fixed Assets

along with supportings
2. Budget of Capital Expenditure

Control Design
Conclusion
(Effective,
Ineffective)
[Basis: Process
Mapping]

Control Testing is in process and base

we will comment on the implement
efectiveness conclusi

Control
Implementation
Conclusion
(Implemented, Not
Implemented)

1. JV of purchase of Fixed Assets

along with supportings
2. List of personnel authorized to
raise PO and authorize to approve
PO

1. Agreements/PO of Vendors

(A) POs along with Explaination ,

Quotations & Comparitive Sheet
from Vendors
(B) List of access control of tally
rights

(A) POs along with Explaination ,

Quotations & Comparitive Sheet
from Vendors
(B) List of access control of PO
Software
(A) List of access control of PO
Software
1. Paid invoces of vendors along
with supportings

(A) JV Invoices of vendor along

with supportings (of Fixed Assets
only)
(B) Budget of Capital Expenditure
(C) Mails of Budget Analysis

(A) Payment vouchers along with

supportings
(B) Board Resolution for Payment
Authorization Matrix
(C) Screenshots if possible while
checking online payment
(D) Monthly Cash Flow Statement,
weekly Review Statement of
Creditors/Mail Copy

(A) Payment vouchers along with

supportings
(B) Board Resolution for Payment
Authorization Matrix
(C) Screenshots if possible while
checking online payment

(A) Bank Reconciliations

(B) Vendor Reconciliations

Payment Vouchers along with

supportings

(A) Fixed Asset Register

maintained by organization.
(B) JV of Fixed Assets along with
supportings
(C) Last Report of PV of Fixed
Assets

(A) Fixed Asset Register

maintained by organization.
(B) JV of Fixed Assets along with
supportings
(C) Last Report of PV of Fixed
Assets

(A) JV of Fixed Assets along with

supportings
(B) JV of Operating Expenditures
along with supportings

NA

(A) JV of Fixed Assets along with

supportings
(B) Budget of capital expenditure

(A) Fixed Asset Register

maintained by organization.
(B) Last Report of PV of Fixed
Assets

(A) Valuation methodolgy of Fixed

Assets

NA

(A) FAR of company

(B) Last PV Report
(C) List of Access of FA (if not
maintained in FAR)

(A) FAR of Company

(B) Reconciliation of FAR and
Books of Accounts if present

(A) FAR of company

(A) FAR of company

(A) FAR of company

(B) JV of Depreciation of Fixed
Assets along with supportings

(A) FAR of company

(B) Last PV Report

(A) FAR of company

(B) Last PV Report
(C) JV of sale of Fixed Assets along
with proper documentation

(A) FAR of company

(B) Last PV Report
(C) JV of sale of Fixed Assets along
with proper documentation

1. Obtain Agreements of Insurance of Fixed

assets
2. JV of insurance entry along with
supportings

esting is in process and based on the testing result,

ll comment on the implementation and operating
efectiveness conclusion part.

Control OE
Conclusion
(Effective,
Ineffective)

Control Test
Testing Result
Result
Reference
Pass/Fail