The first step when planning a physical audit

Organizations need to determine what assets will be included in the audit.  Is it going to be solely based on the capital asset policy or will it also include expensed items which fall below the capitalization threshold?

Some expensed items are categorized as ‘portable and attractive’ and are therefore sometimes included in an audit.  Identifying and controlling these items is an integral part of a risk management and internal control strategy.  An organization needs to find the balance between the benefits associated with greater control versus the inevitable administrative costs.

After agreeing on the items to be audited, the next thing to decide is what details will be collected.  Some organizations are solely interested in finding and verifying the items, while others will take the opportunity to gather additional data.  While conducting the audit, it is also a good time to note the condition of assets.  If other details haven’t been previously recorded, such as serial numbers, make, model, meter readings, color, room location, last serviced ate, etc., then this is a good opportunity to collect this type of information.  With this data, a standard asset register can be turned into a powerful enterprise asset management tool.  Audit managers should determine whether the company leases equipment and, if so, how they can be identified.  Accidentally disposing or transferring assets that belong to a leases company can lead to undesirable fines. 

Finally the audit location(s) need to be clearly defined.  If an organization is in one building then this process is relatively easy, but if it has multiple locations then either the physical audit will have to be rolled out in stages or it will have to be completed by teams.  If a suitable resource isn’t available to perform the work, a professional services company can assist.