## Auditing Intangible Assets: Completeness Assertion
The completeness assertion asks: Are all intangible assets that should be recorded, actually recorded? A failure of completeness means the financial statements are understated.
### Step-by-Step Audit Approach
#### Step 1: Verify the Movement Schedule
The standard reconciliation formula must hold:
```
Opening Balance + Additions − Deletions = Closing Balance
```
- Arithmetically verify the schedule
- Tally closing balance to the entity's books of account
#### Step 2: Test Additions
Obtain a complete listing of additions. For each material addition:
| Check | Standard |
|---|
| Recognition criterion | AS 26 – Intangible Assets |
| Research vs development phase | Research = expense; Development = may capitalise |
| Date of use | Verify certificate/report for commencement of commercial use |
| Approval | Verified by appropriate personnel |
| Procurement process | Competitive quotations/tenders followed |
Critical Rule (AS 26): Expenditure on the research phase (or research phase of an internal project) must always be expensed and can never be capitalised as an intangible asset.
#### Step 3: Test Deletions
For each deletion:
- Understand reason and rationale from management
- Obtain management approval/disposal note
- Verify competitive quotes/tenders for disposal proceeds
- Confirm correct removal of:
- Original cost
- Accumulated amortisation up to disposal date
- Resultant gain/loss recorded in books
### Example 1
Q: CA Karan is auditing Data Solutions Pvt. Ltd. The company capitalised ₹15 lakhs as 'internally generated software' without maintaining any documentation on when the development phase started. What should the auditor do?
A: CA Karan must verify documentation to distinguish the research phase from the development phase. Per AS 26, expenditure during the research phase must be expensed immediately. Without documentation proving the development phase start date, the auditor cannot confirm the capitalisation is valid. He should request a certificate/report from management evidencing the date development commenced and the criteria for recognising the intangible asset were met at that point. If documentation is absent, the capitalisation is questionable and may need to be reversed.
### Example 2
Q: During audit, an intangible asset (software license) costing ₹8 lakhs was deleted from the schedule. The auditor finds no disposal note or sale proceeds document. What procedures should be applied?
A: The auditor should: (1) Enquire from management the reason for deletion, (2) Obtain written management approval authorising the deletion, (3) Verify whether any sale proceeds were received and if so, verify competitive quotes obtained, (4) Confirm that the original cost AND accumulated amortisation up to disposal date were correctly removed from the books, (5) Verify that the gain/loss on disposal is correctly recognised in the P&L.