Fixed Asset Verification Process – A step by step guide for success

Table of Contents

Introduction

Fixed asset verification is essential for maintaining accurate asset records, ensuring compliance with financial regulations, and improving operational efficiency. Organizations often struggle with ghost assets (assets recorded but not physically present) and untracked assets, which can lead to financial discrepancies and mismanagement. Conducting a structured fixed asset verification process helps prevent these issues, ensuring that all assets are accounted for and properly recorded.

1. Planning the Fixed Asset Verification Process

A well-defined plan sets the foundation for an effective verification process. This includes:

  • Defining the Scope: Determine which asset categories will be verified, the locations covered, and whether tagging is included.
  • Appointing a Verification Team: Assign personnel who will conduct the verification and ensure they have clear responsibilities.
  • Setting Timelines: Establish a schedule for verification, ensuring minimal disruption to operations.
  • Preparing Equipment: Ensure availability of mobile devices, barcode/RFID scanners, asset tags, and verification checklists.
  • Compiling an Asset List: Gather a complete register that includes asset descriptions, locations, assigned users, and asset IDs.
  • Securing Approvals: Obtain necessary permissions for access to restricted asset locations.
  • Creating Standardized Checklists: Develop structured templates specifying details to be verified for each asset, including condition, location, and user details.
  • Training the Team: Educate verification personnel on asset identification methods, scanning procedures, and documentation requirements.

2. Conducting Physical Verification of assets

Physical verification involves visiting asset locations and verifying details based on the compiled asset register. The process includes:

  • Locating and Identifying Assets: Cross-check each asset against the register and confirm its existence.
  • Verifying Asset Condition: Assess whether the asset is functional, damaged, or obsolete.
  • Confirming Asset Location and User: Ensure the asset is in the correct location and assigned to the right user or department.
  • Applying or Scanning Asset Tags: If tagging is included in the verification scope, affix new tags or scan existing ones for automated identification.
  • Documenting Unrecorded Assets: Identify and record additional assets found during verification that are missing from the register.
  • Flagging Discrepancies: Note missing, misplaced, or unidentifiable assets for reconciliation.

3. Reconciling Discrepancies

Reconciliation is necessary to address gaps between the physical verification results and the existing asset register. This step includes:

  • Comparing Physical Findings with the Asset Register: Identify discrepancies such as missing assets, unrecorded assets, or incorrect asset details.
  • Investigating Causes of Discrepancies: Work with asset custodians and review historical records to understand why discrepancies exist.
  • Categorizing Issues:
    • Missing Assets: Assets recorded in the register but not found physically.
    • Additional Assets: Assets found physically but not recorded in the register.
    • Incorrect Information: Errors in asset descriptions, locations, or assigned users.
  • Taking Corrective Actions: Depending on the findings, corrective actions may include updating records, re-tagging assets, or marking assets for disposal if obsolete.
  • Performing Intra-Location and Inter-Location Reconciliation: If assets have been relocated within or across departments, update records accordingly.
  • Documenting Reasons and Seeking Approvals: Maintain an audit trail of reconciliation findings and obtain necessary approvals for changes.

4. Updating the Asset Register

Once discrepancies are resolved, update the asset register to ensure alignment with the verified data:

  • Recording Changes: Update details such as location, user, condition, and status (active, under maintenance, obsolete).
  • Ensuring Compliance: Align updates with accounting standards, asset depreciation policies, and audit requirements.
  • Maintaining an Audit Trail: Keep detailed records of updates for future reference and regulatory compliance.

5. Reporting and Process Improvement

The final step is compiling a structured report that summarizes the verification findings and proposes improvements. The report should include:

  • Summary of Assets Verified: Total assets checked, their locations, and their status.
  • Discrepancies Identified: Detailed list of missing, additional, or incorrect assets.
  • Corrective Actions Taken: Updates made to the asset register, assets reallocated, and obsolete assets flagged for disposal.
  • Recommendations for Process Improvements: Suggestions to improve future verification cycles, such as adopting automation or refining tagging processes.
  • Approval and Review: Submit the report for review by finance, audit, or compliance teams.

Conclusion

Regular fixed asset verification (annually or biennially) enhances financial accuracy, operational efficiency, and regulatory compliance. Organizations should adopt a structured approach, leveraging technology such as RFID or barcode scanning, to streamline the process and reduce errors. By ensuring assets are accurately accounted for, businesses can optimize asset utilization, prevent losses, and maintain robust financial records.

Related Articles

Blog Image

Verification of Assets during an Audit

Create a highly realistic image of two men working together on a laptop at a modern desk. The laptop

Asset Reconciliation – Key to Successful Asset Verification

Asset Verification Methods

Understanding Asset Verification Methods : WTW (Wall to Wall) and FTF (File to Floor)