By its definition, the term ‘asset’ means an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies. This is inherent to a company’s existence on a going concern basis. No company can function without assets. As a prudent business owner you might certainly be interested in verifying the existence of your assets. Further, physical verification of assets is also a point upon which auditor places his/her opinion. But it is worth mentioning that companies act places onus on management of the company for physical verification of assets.
By acting prudent and hiring a team of expert physical verifiers you can get aware about the lack in your company’s internal control system with respect to fixed assets. Some of the potential misstatements in fixed assets on account of frauds and errors include:
(a) Purchase of an asset at an inflated price especially from a related party.
(b) Wrong write-off of the asset as scrap, obsolescence, missing, donated, or destroyed.
(c) Expenditures for repairs and maintenance recorded as assets or vice versa.
(d) Recording of an asset purchased, which in effect has not actually been received by the entity at all.
(f) Removal of an asset paid for by the entity or use of an asset of the entity for the benefit of a person other than the entity.
As there are risks involved, you should immediately put on appropriate internal control measures.
Having a track and managing the fixed assets is critical and a compulsory periodic process that should be carried out in the organization. Maintaining a fixed asset register helps, generally the fields present are:
As per a recent study, amongst assets that are tagged, about 62% of the companies conduct a periodic physical asset verification, 14% conducted by the staff, another 5% through third party companies, another 5% through cycle counting and the rest 14% do not conduct any asset tagging, a big mistake as per the industry experts.
For assets that are not tagged 33% do not physically verify untagged assets, 17% do cycle counting based asset description performed by company employees and 50% conduct physical inventory based asset description performed by company employees.
The whole situation makes them lose on resources. This is a mandatory exercise and will result in saving a lot of your resources.
We at CFO Sir India, take all your worries away with respect to physical verification of assets. Connect with us at email@example.com and let us help you in verifying and tagging your assets in a cost efficient and effective manner.