Roles and responsibilities in fixed asset management – Part II

The Insurance Manager is often the forgotten player in the area of property records and fixed asset management. Yet in many companies insurance premiums are substantial. Insurance premiums are a direct reflection of the information supplied by the insurance manager to the broker or insurance company. Errors in the system, both ghost assets and zombie assets, adversely impact the accuracy of reportable information. Most companies can reduce their property and casualty (C&P) insurance when the property record has accurate internal controls.

The owner of an asset is the individual or department that has physical custody of the asset and should have overall responsibility for the asset. In many organizations, however, this sense of responsibility is missing. Thus there appears to be no incentive for asset sales, retirements or transfers to be recorded in a timely basis. What the property accountant does not know simply cannot be recorded.

Therefore it is the responsibility of the asset owner to communicate properly. The Internal Auditors should treat property records, and the internal control of fixed assets, as a high priority. Most internal audit departments have very limited resources, and the audit committee and top management will usually indicate areas of concern. With other aspects of internal control pretty much taken care of, one of the largest areas still needing scrutiny deals with PP&E.

Finally, the External Auditor allocations of resources are governed by a number of factors, including perceptions of SEC and PCAOB areas of interest. It would not be surprising to see these regulatory organizations start to scrutinize internal controls on fixed assets; in turn this will force independent auditors to increase their focus on this specific area in future annual audits.