Physical Verification of Assets — Fixed Assets
Every business needs to ensure regular Fixed Asset Verification for the purpose of tracking and asset inventory management.Asset Reconciliation is a time saving mechanism enabling more effective utilization of manpower reducing cost to company and frivolous man-hour spends.It includes financial history as well that assists organizations in making informative decisions.
These can be maintained at department, business, location and corporate level and a periodic reconciliation is needed to ensure the veracity of these records. Ideally, a quarterly audit of movable fixed assets is recommended, though this can vary from industry to industry.
What is Physical Verification of an Asset ?
Physical Verification of Fixed Assets is a procedure that is conducted by auditors to ensure that the assets of an entity exist in reality. It is of extreme importance for every organization to carry out the physical verification of fixed assets, at the end of every financial year.
Why is Physical Verification of Assets Important?
In companies where multiple classes of assets exist, and are widely dispersed across departments, offices and even people, keeping track of all of them can be a daunting task. This has been one of the topmost priorities for the Finance and Admin teams as they are the caretakers of resource management. Therefore, timely asset verification and records upkeep becomes critical.It is mandatory for organizations to conduct an annual physical count of all the fixed assets to check for their depreciation, resale value, verifying the accuracy as there would be continuous addition and disposal of items regularly. Estimating the remaining utilization factor is something that is equally important to evaluate the life cycle of the particular product/ resource.Objectives:-
- Statutory compliance as per CARO 2020 (replaced earlier order under CARO 2016)
- Ensures the physical existence of assets
- Valuation and rectification for any accounting discrepancy
- Internal compliances of the organization
- Critical for continuous customer service
FAQ
Most frequent questions and answers
Maintaining a fixed asset register helps simplify the process. Physical Asset Audit which is a necessary part of audit can be successfully carried out with the help of handheld devices for scanning fixed assets which have been tagged. Using the software, a business can easily track its assets and thus conduct a more comprehensive Fixed Asset Audit Inventory and reconciliation.
A fixed asset register typically records the following data:
- Net book value,
- Current and accumulated depreciation rate,
- Location of the asset,
- Custodian Details,
- Cost of the asset,
- Asset use life or depreciation rate,
- Asset Availability and Health.
- Asset identifier code
- Name of asset
- Purchase details
Physical verification should be done at regular intervals & there are many benefits of assets tracking and verification as:
- Monitoring of assets movement between locations,
- Saving in time and money in replication of assets between departments,
- Put a reasonable control over theft of assets.
The fixed asset management process:-
- Recording of fixed assets
- Tracking of the location of fixed assets
- Maintenance of fixed assets
- An accurate valuation of depreciation
- Various reports under various regulations
- Physical verification of fixed assets at regular intervals
- Physically verify property tag number, serial number, manufacturer/ model, location, description, and condition code.
- Follow-up visits as compulsory to verify any residual assets and gather additional information
- Creation of audit trail to link the reconciled inventory file with the existing fixed asset accounting records.
- To know that assets that are shown in the balance sheet are true, genuine, and real.
- To know whether assets exist or not.
- Check all the documents mentioned are valid or not.
- To check the assets condition as mentioned is correct or not.
- Find out the ownership and title of the assets is one of the main objectives of verifications.
- To show the correct valuation of assets and liabilities.
- Manage compliance.
- To see if purchased assets are mentioned correctly and sold assets are excluded.
- To ensure that the true value of the asset is represented after depreciation.
- Verification is done to detect fraud because assets might be misused or stolen.
Following are the main techniques for physical verification of asset audit:
- Asset physical existence
This technique is used for verifying assets physically exist or not. These assets could be any or immovable property. - Purchase asset for business
It is verifying that asset is purchased for the company by the company. The aim of this technique is verify & check the purchased assets. It shall not be in the name of any employee. - Asset ownership
This technique is used for identifying ownership of the asset. It must be in the name of the business, and it should not be on the lease. Deeds and purchase documents are also verified. - Correct asset evaluation
This asset technique is used for calculating the correct asset value. Management estimates the value of assets, and the auditor verifies them by cross-checking documents, and the auditor verifies them by cross-checking records and physically inspecting assets.
More Services
- Physical Verification of Assets
- Physical Verification of Fixed Assets
- Fixed Asset Verification
- Fixed Assets Register
- Barcoding of Fixed Assets
- Fixed Asset Management Software
