Controls for Fixed Assets (#15)

In this episode, we discuss the controls associated with fixed assets. Several controls are useful for monitoring which assets are purchased and disposed of, as well as for maintaining security over them. Key points made in the podcast are noted within the following general classifications:

Acquisition controls:

  • Use an annual capital budgeting process to approve purchases, to ensure that purchases are matched with available funding

  • Make it harder for sudden asset purchases to be approved, since they might otherwise sidestep purchasing controls

  • Use a capital request form that details the need for asset purchases

  • Use a hurdle rate for discounted cash flow analyses, which can identify marginal asset requests

  • Lock down access to the fixed asset master file, so that no one can make adjustments to hide asset thefts

  • Review all changes to the fixed asset master file, to spot unauthorized changes

  • Create ID tags for all fixed assets and log them, so that each asset can be tracked over time

  • Assign responsibility for all fixed assets to employees

  • Use a formal transfer document to shift responsibility for a fixed asset to a different manager

Security controls:

  • Restrict access to fixed assets, such as the admin area or the tool crib, to reduce the risk of asset theft

  • Attach RFID tags to fixed assets, with a link to an alarm system that will be triggered if they are taken off the premises

  • Audit all fixed assets on a rolling basis

Disposal controls:

  • Review whether any assets on the premises are no longer needed, and so can be sold

  • Require a disposition form for all fixed asset disposals, with manager approval required

  • Make sure that the cash received from a fixed asset sale matches the sale document, to spot instances of employee theft of the proceeds

Related Courses

Accounting Controls Guidebook
Fixed Asset Accounting
How to Audit Fixed Assets