We know how significant an audit is! The objective of an audit is to increase compliance & asset accuracy. Asset audits can result in smoother work processes and a better-informed decision can be made which is beneficial to companies.
Assets are very significant to an organization. They are used in in long term. In order to maintain accuracy, audits are conducted. For the business to function efficiently assets must be available physically.
According to Statista, “It is projected that the revenue of accounting, bookkeeping and auditing activities; tax consultancy in Luxembourg will amount to approximately 3.795,4 million U.S. Dollars by 2023.”
The number speaks themselves and its only representing Luxembourg data so imagine how huge numbers will come if the other countries are added?
What is Assets Auditing?
Fixed assets auditing is the verification of assets physically. Mainly two types of Audits are there, first internal audit and second is an external audit, as explained below. It is used to maintain the accuracy & transparency in an organization.
Also Read: Importance of Assets Auditing for Equipment & Tool Rental Companies
It examines the effectiveness of an organization's internal control and it is accounting process. Internal auditors work for the organization as internal employees. An objective of the internal auditor is to add value and improve organizational operations.
The external audit is performed by external entities. External auditor plays a critical role in validating & evaluating organization assets. An external audit provides both business and government with a valuable check of an organization's accounting.
What is the Objective of Asset Auditing?
The asset auditing objective is simple! That assesses the adequacy and effectiveness of the internal controls over assets management. With the correct asset record, the financial balance sheet will also be accurate. Fixed will also be there to function business properly.
If asset records are not correct then it can be harmful to a company because it will affect taxation as well as overall financial statistics. An asset audit is also done to keep the asset secured from theft and unauthorized access.
What Happens in the Asset Audit Process?
In this process, the organization provides their assets list, and then actual physical assets are checked. Basically, the purpose of the asset audit is cross-checking of assets that they actually exist or not.
Moreover, it provides the actual asset value but there are other factors as well, such as asset condition, asset life left, and provides the overall life cycle of a fixed asset. Furthermore, auditing fixed assets are very crucial to ensure that depreciation is in asset management compliance with management's goals.
If an audit is done manually then it can be a long task depending on the size of the organization. However, the auditing phenomena does not have to be long, time-consuming, and exhausting task. With the asset management software, it allows you to keep track of your asset and provides real-time information assisting you in the audit process and make is process simpler, quick, effective, and painless.
What Are the Benefits of Asset Auditing?
Some of the benefits of asset auditing:
Also Read: How Effective Are Mobile Audits to a Business?
1. Depreciation Management
The value of the asset decreases time after time that is depreciation. Every fixed asset has its own depreciation rate. Depreciation provides the way to the company to distribute the cost of an asset according to the useful life of the asset.
In order to calculate accurate asset depreciation, there are two methods written down value and the straight-line method.
2. Get Rid of Ghost Assets
Ignorance can be harmful to the business. As a good business practice, one should always emphasize on asset tracking. With the help of this practice, ghost assets will not harm your business. Ghost assets are those assets which are physically not available but they are accounted in records. As a result, you end you paying taxes for those assets which you are not own. But with auditing, you can identify and get rid of ghost assets.
3. Regulatory Compliance
When an external audit is conducted and if it is found that you are using unauthorized software, the auditor can penalize the organization for a huge amount of money. This is also an example of a compliance breach. Therefore, it is very important to maintain compliance. In order to ensure compliance, audits are really helpful. When an asset is used for another purpose rather than what it is intended towards, then it is considered as an indicator of a compliance violation.
What Are the Features of Asset Management Software That Can Assist in Auditing?
Below we have mentioned the features of asset management software that can assist in asset auditing:
- If an organization has multiple branches then obviously there are assets located on multiple locations so the software empowers the user to create and assign audits as per the asset's location and their categories.
- The audit objective is to save assets from damage, theft misplacement.
- You can physically verify assets quickly via the mobile application and the best part is the verification can be done offline. Whenever the mobile gets connected to the internet, the collected information is synchronized.
- During the audit, the status can be seen as if an asset in present, not present or present with incorrect data like tagged asset is not the same what system has specified.
- Asset reports are automatically generated and it can be exported in various formats. It also empowers the user to get customized data report as per requirement.
- Users can assign a unique set of assets so that no data collision occurs and confusion can be avoided.
- There is a depreciation calculation program which offers different methods to calculate depreciation while generating reports.
So, these were some pointers that can be useful in asset auditing.
The audit objective is to keep accurate asset information. Hence, auditing is an exceptionally critical process for your business. Deployment of an asset tracking system that also provides ease during the asset auditing process, along with a complete audit report, will help an organization grow and run smoothly.
In addition, it will keep your asset history records intact and you can know all the asset-related data whenever you want to. The product can be used on a laptop, personal computer, tablet, mobile, etc.
Also Read: What Are the Audit Procedures to Verify the Fixed Assets?
Frequently Asked Questions (FAQs)
1. Is there a difference between Auditing & Asset Auditing?
Yes, there is a difference between them! Auditing is the process of examining the financial records and to cross-check if they are accurate. Whereas, asset auditing is the examining assets physically exist or not and with their condition.
2. What is the verification of assets?
Verification is the phenomenon in which auditor checks if the asset exists physically or not. Legal ownership of assets is also checked in the process. Verification of assets can be done onsite and offsite both. In onsite verification of assets, auditor visits the site and check asset physically also check its condition whereas, in offsite, photos, official records, and documents are checked.
3. What is the process of auditing fixed assets?
The auditor should test and check the book records of fixed assets, verifying it with the physical verification reports. He should examine whether the discrepancies noticed on physical verification have been properly resolved or not.