Auditing Fixed Assets


Conducting regular audits of fixed asset inventory ensures your company’s asset records are accurate. Without accurate asset records, your financial balance sheets will be incorrect, loss may occur, or fixed assets necessary for the continued functioning of your business may not be available when needed. The audit process does not have to be difficult or time-consuming.  Investing in an asset management solution not only provides a tool to record asset information but many solutions include mobile capability – which makes auditing of your assets simple and painless.  

  • Accurate Financials

If your asset records are not accurate, your balance sheet will be incorrect. This can be extremely detrimental to a company, especially where depreciation and taxation are concerned. Fixed asset reporting is an intrinsic part of the balance sheet.

Asset Purchase Price – Accumulated Depreciation = Asset Carrying Value

Combined Amount of Assets’ Carrying Values – Disposition of Assets = Account Balance of Fixed Assets

Inaccurate asset documentation implies there is an issue with the overall validity of transactions. If your company’s fixed asset listing is considerably different than what is detailed (either in a software program or on paper reports), there is a significant problem with the process of managing your company’s assets.

iStock_000002888302SmallBoth private and public companies are required to keep accurate reports for a variety of reasons. Government, charity, and educational institutions may need to classify and track asset details by funding source or grant. Having incorrect fixed asset reporting can be incredibly problematic in these situations; a non-profit organization that does not properly track its fixed assets by grant could potentially lose or be forced to repay funds.

Additionally, companies and organizations that depend on their fixed assets – where missing or lost assets impede employee productivity – are able to immediately correct asset management problems by regularly conducting thorough asset audits.

  • Audit Principles

Auditing Fixed assets is not always conducted in the same way; these audits can be as simple or as complex as deemed necessary. Often, companies will perform simple fixed asset audits throughout the year and perform an in-depth audit at the very end of the year.

However you choose to complete the audit, the basic principle is the same:

  • Look at your last audit numbers.
  • Determine your current audit numbers.
  • Ensure that the difference coincides with your transaction reports.

The amounts listed on your balance sheet should match the detailed listing of your fixed asset inventory. When comparing the two, verify the following is true about each asset:

  • The asset is valued correctly.
  • The asset has been classified correctly.
  • The asset’s purchase and/or sale dates are accurate.

In addition to the information listed above, you should also have all applicable documentation and ownership information for each asset.

  • Loss Prevention

Fixed asset audits also determine if your company is experiencing inordinate shrinkage.  If losses form a pattern and are consistent across all assets, evaluating how your assets are assigned, moved, or stored should identify the weakness within your company’s asset management procedures; allowing you to address and correct those procedural gaps before your losses become too severe. Choosing to skip auditing means you will not identify equipment loss in a timely fashion, and your company may continue to lose equipment.

According to the Department of Justice, nearly one-third of all employees commit some degree of employee theft.

Furthermore, the longer an asset is missing, the more difficult it is to trace its path – a path that would lead to recovery of the asset.  Timely identification of missing assets means you have greater opportunity of retrieval and less chance you’ll have to purchase a replacement.

  •  Auditing Fixed Assets

iStock_000018187101SmallBy tracking your assets (location, movement, check-outs/check-ins, and disposal) with an asset management solution, you guarantee accuracy.  Every time an asset is “managed” that transaction should be recorded.  Using barcoded asset tags makes the recording of those transactions as simple as a scan.  These resulting, detailed records ensure your audit is completed quickly and efficiently because you won’t spend most of your time addressing discrepancies.  Instead, you will simply scan the assets within a location and allow the asset tracking solution to do the data analysis.

Asset tracking solutions that include the use of a mobile computer means you can conduct an audit free of a traditional desktop computer.  Walk into any or your locations, scan all of the assets, and then synchronize the mobile computer with your desktop to update your asset database.

Investing in an asset tracking solution is the first step in accurate fixed asset records; auditing those assets regularly guarantees the validity of your financial records and helps protect your company from loss.

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Brian Sutter

Brian Sutter

Director of Marketing at Wasp Barcode
Brian Sutter is the Director of Marketing at Wasp, responsible for the development and execution of the company’s marketing strategy. His role encompasses brand management, direct and channel marketing, public relations, advertising, and social media. He also writes and speaks on topics related to helping small business owners grow their business and improve operational efficiency.
Brian Sutter
Brian Sutter