Capital Assets – Using Data Analytics to Strengthen Our Audits
by Joshua Jumper, CPA, CGFM, Audit Manager
Posted on April 28, 2021
Updating and maintaining an accurate capital asset listing is not typically at the top of anyone’s to-do list. However, it is something that is required of your organization and it oftentimes is a lot of work. Most organizations spend the majority of their energy related to capital assets to ensure:
- Current year purchases get added
- Items disposed of get deleted
- Vehicle, furniture, and equipment items are periodically inventoried
These are some of the most important steps to ensuring the annual capital listings are completed, accurate, and ready for auditor review. As a result, a significant portion of HeinfeldMeech’s audit procedures over capital assets is spent analyzing these very steps. To help strengthen audit procedures over capital assets, HeinfeldMeech utilizes CaseWare IDEA software, a comprehensive, powerful tool that allows for faster and more effective auditing techniques over various audit areas, including those three items noted above.
Specifically, HeinfeldMeech can utilize the IDEA software to do the following:
- Aggregate Current Year Deletions – The software compares the current year and prior year cumulative listings to see which items have been deleted and then is compared to the deletions listings provided to the auditors.
- Aggregate Fiscal Year Additions – The software compares the current year and prior year cumulative listings to see which items have been added and then is compared to the additions listings provided to the auditors.
- Recalculate Depreciation Expense – The software recalculates depreciation expense for each asset and compares it actual depreciation expense reported.
Now, it’s important to remember that your auditors were already performing procedures to accomplish these tasks. However, what data analytics can do is increase the number of transactions reviewed with greater efficiency.
Moreover, data analytics also allows the auditors to review the capital asset listings from new points of view. These include:
- Checking for assets with negative net values (accumulated depreciation exceeded the cost)
- Reviewing assets that have no depreciation expense but have not met their useful life
- Checking for assets with no assigned GASB function
- Identifying assets that have a value that is below the established capitalization threshold at the organization
- Analyzing useful life – Reviewing all assets that are in still in use 10 years longer than their useful life. This test identifies assets that may be no longer in use by the organization.
Again, your auditors were already reviewing the listings for some of these items on a test basis each year. But since most capital asset listings that are thousands of lines long, it can make it difficult to identify all potential errors. Although, this ‘big data’ analysis may result in an audit finding, it can ultimately assist the client to improve their listing. As always, we encourage our clients to continue to view the audit as an opportunity to see where improvements can be made within your organization. Data analytic procedures will further help achieve this objective.
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