A logistics or transportation company audit adds three things a generic fixed-asset-light services audit doesn't test: component-wise depreciation of the vehicle fleet, since Schedule II's component approach treats a vehicle's engine, body and tyres as having genuinely different useful lives rather than depreciating the whole vehicle as one block; freight revenue cut-off for journeys in progress at the reporting date, since a multi-day haul that starts before and ends after the period end needs revenue split by distance or time covered rather than booked entirely at origin or entirely at destination; and fuel cost reconciliation against actual distance travelled, which is both a cost-control and a fraud-risk area given how easily fuel can be siphoned or over-claimed relative to the trip actually run.
Component depreciation on the fleet
Schedule II to the Companies Act permits, and in substance expects, component accounting where a significant part of an asset has a useful life materially different from the asset as a whole. Tyres in particular have a useful life measured in a fraction of the vehicle's own life and are routinely replaced multiple times over the vehicle's life — depreciating the original tyre cost over the vehicle's full life, and then expensing replacement tyres entirely on replacement, produces a different (and usually understated) depreciation charge than treating tyres as their own component from the start.
- 01Confirm the components actually separated in the fixed asset registerCheck whether engine/chassis, body and tyres are tracked as separate components with separate useful lives, or whether the vehicle is depreciated as a single block with a single life.
- 02Test the useful life assigned against actual fleet experienceCompare the assumed life for each component to the client's own replacement history — a tyre life assumption well above what the client's own records show it actually replaces tyres at is an audit finding.
- 03Check accounting for mid-life replacementsA tyre or engine replacement should derecognise the remaining carrying value of the replaced component and capitalise the new one, not simply expense the replacement cost on top of continuing to depreciate the original.
- 04Verify residual value and impairment for an ageing or idle fleetVehicles taken off active routes (damaged, obsolete, awaiting sale) need an impairment assessment against realisable value, not continued depreciation on the original schedule as though still in active use.
Freight revenue cut-off
Freight revenue for a point-to-point haul is, in substance, a performance obligation satisfied over the duration of the transport, which for a multi-day journey means revenue should be recognised progressively as the journey proceeds, not entirely at trip start (which overstates revenue on in-transit journeys at period end) or entirely at trip completion (which defers revenue that was substantially earned before the cut-off).
- Identify all journeys in transit at the reporting date from the trip/consignment log, not from the revenue register alone, since an in-transit trip may not have been invoiced yet.
- Test the basis used to split revenue for in-transit journeys — distance covered, time elapsed, or another reasonable measure of progress — and confirm it is applied consistently.
- Check proof-of-delivery or consignment-note acknowledgment dates against the revenue booking date for a sample of trips around the cut-off.
- Confirm detention and demurrage charges (additional charges for delays at loading/unloading) are recognised when the underlying event occurs, not bundled into the base freight recognition pattern.
Fuel cost reconciliation
Fuel is usually the largest variable cost in a transportation business and one of the easiest to divert or over-claim, since the link between litres consumed and distance actually driven depends on records (fuel cards, GPS/odometer logs, mileage norms per vehicle type) that vary a great deal in reliability across operators.
| Check | Evidence |
|---|---|
| Fuel consumed vs distance covered per vehicle | Fuel-card or bunk records against GPS/odometer logs, compared to the vehicle's expected mileage norm |
| Outlier vehicles (unusually high consumption) | Investigated individually rather than averaged away across the fleet |
| Fuel purchases against route assignment | Fuel purchased in locations consistent with the vehicle's actual assigned route for that period |
| Driver-level consumption patterns | Compared across drivers on similar routes to flag individual outliers |
A fleet with no GPS or odometer tracking, relying only on fuel-card spend with no independent distance corroboration, has no real control over fuel leakage regardless of how detailed the fuel expense ledger looks — this is worth flagging as a control weakness even where no specific error is found.
This is practical guidance written for audit teams, not an authoritative statement of any standard or statute. Standards, forms and timelines change. Check the current text issued by the ICAI and the relevant authority before relying on anything here in an audit file.
Related resources
- Fixed assets & capexDepreciation testing: audit procedure and recomputationChecking useful lives against Schedule II, recomputing the charge independently for a sample, and handling mid-year additions, disposals and changes in estimate.
- Revenue, receivables & cut-offSales cut-off testing: dispatch, invoice and ledger datesWhy dispatch, invoice and ledger dates disagree at year end, how to sample either side of the cut-off, and the evidence that settles which date governs.
- Fixed assets & capexFixed asset register audit: completeness and accuracy checksWhat a fixed asset register must contain, how to tie it to the general ledger, and the gaps that quietly survive year after year if nobody checks for them.
- Fixed assets & capexPhysical verification of fixed assets: how to plan itA rotational verification policy, reconciling the count to the register, handling assets at customer or third-party sites, and the link to CARO 3(i).
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- Purchase register checkDuplicate payments, round-sum amounts, weekend-dated invoices, incomplete records.
- GSTR-2B reconcilerMatches your purchase register against GSTR-2B — missing invoices either side, amount mismatches.
- Bank reconciliation checkerMatches your cash book against a bank statement — what's outstanding on each side.
- Payroll red-flag scannerBank accounts shared across employees, and records missing an ID, PAN or salary.
- CARO applicability checkerAnswer a few questions about the company and see which CARO 2020 clauses likely apply.
- MSME payment delay checkerMSME-flagged invoices paid — or still unpaid — beyond the 45-day Section 22 limit.
- Related-party transaction screenerTransactions above a threshold you set with no approval reference, grouped by counterparty.
- Depreciation useful life checkerCompares a useful life in use against the Schedule II, Part C indicative figure.
- Materiality calculatorOverall and performance materiality against PBT, revenue, assets or equity, with reasoning shown.
- Sample size calculatorStatistical sample size for a test of controls or a substantive test of detail.