Outline the audit procedure to be carried out on impairment of assets?

Assets should be audited for impairment to prevent overstatement on the balance sheet. It exists when an asset's fair value is less than its carrying value on the balance sheet. If impairment is confirmed as a result of testing, an impairment loss should be recorded. The following are the procedures; 1. Set the assets to be audited, where by they are sorted the fixed asset register by carrying amount, which is the original book value minus depreciation and any prior impairment charges. Use the Pareto principle to select the 20% of assets whose aggregate carrying amounts comprise 80% of the total recorded carrying amount of fixed assets. 2. Determine Impairment Level: Calculate the undiscounted cash flows expected from each of the selected fixed assets, and list these amounts in the fixed asset register next to the selected items. Take note of any situations where the carrying amount of an asset is greater than its undiscounted cash flows. Thus for the noted items, calculate the difference between the carrying amounts and undiscounted cash flows, and create a journal entry for the difference in the general ledger as an adjusting entry. Only create this entry if the value of a designated asset is not expected to recover. 3. Update Accounting Records: Enter the requested journal entry in the general ledger. Ensure that the recorded impairment is reflected in the fixed asset register for each of the indicated assets. Document the reasons for the various impairments. 4. Revise Depreciation Calculation, adjust the depreciation calculations for the indicated fixed assets to depreciate the new, reduced asset balances for the remainder of their useful lives.