During the audit process, auditors perform a thorough evaluation of fixed assets to determine if there are any indicators of impairment. This involves assessing factors such as changes in market conditions, technological advancements, legal issues, or physical damage that may have affected the value or usefulness of the assets. Auditors review relevant documentation, including financial statements, management's assessments, and external appraisals, to gather evidence regarding potential impairments.

2. Testing for Impairment: Once potential impairments are identified, auditors conduct testing to determine the extent of the impairment. This often involves comparing the carrying value of the assets to their recoverable amount, which is the higher of the asset's fair value less costs to sell or its value in use. Auditors may engage external experts to assist in determining fair value or estimating future cash flows to assess value in use. They also evaluate the reasonableness of management's assumptions and estimates used in impairment calculations.

3. Review of Disposals: In cases where fixed assets are disposed of, auditors review the disposal process to ensure it is properly accounted for and disclosed in the financial statements. They examine supporting documentation, such as sales contracts, invoices, and evidence of transfer of ownership, to verify the accuracy of the disposal transaction. Auditors also ensure that any gain or loss on disposal is appropriately recognized and disclosed in accordance with accounting standards.

Objective Type Question: 

What is the step of the audit procedures for fixed asset impairments and disposals involves comparing the carrying value of the assets to their recoverable amount?