Many organisations treat fixed asset verification as a year-end activity, often leaving it until just before reporting deadlines. This can make it difficult to identify and resolve asset-related discrepancies in time. Conducting physical verification of fixed assets periodically throughout the year helps businesses maintain better visibility into asset existence, location and condition.
Why Year-End Verification Can Be Too Late
Fixed assets may be transferred from department to department, office to office, warehouse to warehouse or project to project throughout the year. Some may be transferred, retired or otherwise impaired or disposed of without timely updating of the records. These discrepancies can only be detected at the end of the year if verification is performed at the end of the year.
Frequent physical verification of fixed assets at appropriate times can alert businesses to such discrepancies sooner. This gives finance and administrative teams time to investigate discrepancies and update records before they affect financial reporting.
Identify Missing or Unrecorded Assets
An important reason for asset verification is to determine the existence of assets and the locations where they are recorded. During a physical check, the following can be detected:
- Assets listed in the register but not found during physical verification.
- Assets found at locations different from those recorded.
- Assets that are damaged, obsolete or no longer in use.
- Assets that cannot be identified or verified during inspection.
- Duplicate or incorrect asset identification numbers.
Early identification of these issues helps make reconciliation easier and enables a more accurate asset register.
Improve Internal Controls
Fixed asset records are important not only for accounting but also for maintaining effective internal controls. Assigning responsibility for company property, including furniture, vehicles, equipment and machinery, helps organisations track and protect their assets.
To determine if assets are correctly tagged, assigned and protected, physical verification of fixed assets can be helpful for organisations. Where there are persistent discrepancies identified, management may review and consider the possibility of asset movement weaknesses, documentation and/or authorisation controls.
Encourage good financial reporting
Accurate fixed asset records contribute to reliable financial reporting. Any additions, disposals, transfers and impairments will impact on asset depreciation and asset valuation.
Having a periodic verification process rather than taking a one-off at the end of the year allows finance teams more opportunities to reconcile physical with accounting records. This can help to minimize last minute changes and streamline the year-end closing process.
Make sure to plan throughout the year
One way to do this is to establish a verification schedule that fits the scale and scope of the assets. More frequent checks may be needed for high-value asset items or items that are mobile, and less frequent checks can be done for relatively stable asset items.
The process can be organised in the following ways:
- Asset value and business importance.
- Location and mobility of assets.
- The risk of loss or misuse.
- Previous verification discrepancies.
Review Asset Movements Throughout the Year
Tracking asset transfers throughout the year helps organisations maintain accurate location records and identify discrepancies sooner. Regular reviews make fixed asset verification an ongoing process rather than a rushed year-end activity.
Maintain More Reliable Fixed Asset Records.
Year-end verification remains important, but it should not be the only time businesses check their fixed assets. Periodic physical verification helps organisations identify discrepancies earlier, improve accountability and maintain accurate asset records.
Making verification part of the internal control process gives teams more time to investigate exceptions, correct records and address recurring issues before financial reporting deadlines. This helps businesses maintain better asset control and reduce last-minute pressure.
Looking to keep your fixed asset records accurate throughout the year?
Consider CAC’s physical verification of fixed assets services to help you identify missing or misplaced assets, verify asset records, detect control gaps, and support more reliable financial reporting.
FAQs
Q: How often should businesses physically verify their fixed assets?
Businesses should verify fixed assets periodically based on asset value, location, mobility, risk exposure, and previous verification discrepancies.
Q: What are the common problems found during fixed asset verification?
Common issues include missing assets, incorrect locations, damaged equipment, duplicate asset identification numbers, and discrepancies in asset registers.
Q: How can CAC help organisations maintain accurate fixed asset records?
CAC supports organisations through physical asset verification, identifying missing or misplaced assets, reviewing discrepancies, and strengthening asset-related controls.
Q: What is the difference between fixed asset verification and fixed asset management?
Fixed asset verification confirms an asset’s existence, location, and condition, while fixed asset management covers tracking, maintenance, valuation, and disposal.
Q: Why should businesses verify assets across multiple office locations?
Businesses with multiple locations should verify assets regularly to track transfers, identify misplaced equipment, and maintain accurate records across departments.
