Fixed Assets Audit

At Amit Arun & Assiciates we undertake Fixed Assets Audit & Verification Services

Delhi, Gurgaon, Manesar, Noida, Greater Noida, Faridabad, Baddi, Himachal Pradesh, Jaipur, Alwar, Nagpur, Punjab, Pune and Mumbai.

To Conduct Physical verification of Assets at multiple locations
Identification & tagging of all assets
Reconciliation of results with Assets Register & book record
Uploading in database
Discrepancy resolution
IFRS & CARO compliance

For any inquiries or questions regarding Fixed Assets Management or Verification Contact us at or dial 9810414035

Or visit our website –

Identification of a fixed asset

Fixed assets constitute a major chunk of the total assets in the case of all manufacturing entities. Even in the case of service entities such as hotels, banks, financial institutions, insurers, mobile / telephone service providers etc. it has become imperative to invest heavily in furnishing, equipment, and technology to attract, and retain customers. It is important for a business entity to have a list of its fixed assets. A fixed asset register is that list of assets.

Identification of a fixed asset

In a large corporation, the task of identifying and locating a specific fixed asset can be difficult unless numbering is scientific, systematic, and up-to-date. A common problem in most companies is the improper maintenance of the FAR. Physical verification of fixed assets becomes a futile exercise unless the FAR is properly maintained.

It would be advisable to use a scientific numbering technique to identify fixed assets. The process of numbering fixed assets is called tagging.The purpose of Tagging assets is Tracking movement of assets from one place to another place. An identification number (combination of alphabets, and numbers) is written on the asset. Engraving the identification number on the asset is advisable in the case of plant and machinery where there is heavy wear and tear.

A tag verifies the existence of assets and their location, aids in maintenance, provides a common ground for communication between the Accounts Department and the end-users and recording the net book value of asset in case of sale / scrapping.

It is not necessary to tag all fixed assets. Land, buildings and vehicles all have independent systems of tracking in registration papers and survey numbers.

Fixed Assets Verification Services

At Amit Arun & Assiciates we provide following Fixed Assets Verification Services

Delhi, Gurgaon, Manesar, Noida, Greater Noida, Faridabad, Baddi, Himachal Pradesh, Jaipur, Alwar, Nagpur, Punjab, Pune and Mumbai.

To Conduct Physical verification of Assets at multiple locations

Identifyication & tagging of all assets

Reconciliation of results with Assets Register & book record

Uploading in database

Discrepancy resolution

IFRS & CARO compliance

Objective of Fixed Assets Audit

The overall objectives of the Fixed Asset Audit:-

To conduct physical verification and report the actual physical inventory of fixed assets in a Factory/office.

To match the schedule of fixed assets with actual assets found during verification to ensure the accuracy of fixed asset records.

To label all the fixed assets for easy identification of description of asset and responsible department in future.

To support staff in rectification of book records with respect to missing or additional fixed assets found during audit.

Fixed Asset Management & Tagging Services

Our Asset management solutions are tailored to automate all aspects of your asset reconciliation. Your organization can gain with our experience in asset management and the products that we offer for asset management. We helps organizations to maintain records of fixed assets and complete details of each asset.

Delhi, Gurgaon, Manesar, Noida, Greater Noida, Faridabad, Baddi, Himachal Pradesh, Jaipur, Alwar, Nagpur, Punjab, Pune and Mumbai.

Tagging of Fixed Asset:

The purpose of Asset tagging is to track fixed assets for the purposes of

Charging depreciation
Asset accounting
Preventive maintenance
Prevent theft or loss of asset
Track asset repairs or asset movement
Track the asset location
Asset quantitative Reconciliation

Asset tracking methods

Automate the process of asset auditing by using bar codes reader or
By attaching a radio-frequency identification (RFID) tag to an asset and implement a fixed RFID scanners.

Guidance note on audit of fixed assets


The following is the text of the Guidance Note on “Audit of
Fixed Assets” issued by the Auditing Practices Committee of the
Council of the Institute of Chartered Accountants of India. This
Guidance Note should be read in conjunction with the “Preface to the
Statements on Standard Auditing Practices” issued by the Institute.

1. Para 2.1 of the “Preface to the Statements on Standard Auditing
Practices” issued by the Institute of Chartered Accountants of India
states that the “main function of the APC is to review the existing
auditing practices in India and to develop Statements on Standard
Auditing Practices (SAPs) so that these may be issued by the Council
of the Institute.” Para 2.4 of the Preface states that the “APC will
issue Guidance Notes on the issues arising from the SAPs wherever

2. Chapter 3 of the existing “Statement on Auditing Practices”
related to “Fixed Assets” provides guidance in respect of both
accounting and auditing aspects of fixed assets. The accounting
aspects of fixed assets form the subject matter of an Accounting
Standard on “Accounting for Fixed Assets” which is being prepared by
the Accounting Standards Board of the Institute of Chartered
Accountants of India. This Guidance Note on Audit of Fixed
Assets therefore supersedes auditing aspects of the said Chapter 3
of the existing Statement.

3. This Guidance Note, however, does not supersede the Institute’s
publications which provide guidance on audit of fixed assets with
special reference to certain statutes, e.g., the Statement on
Manufacturing and Other Companies (Auditor’s Report) Order, 1975.

4. In the event of a possible or perceived contradiction between the
Guidance Note and a Statement on Standard Auditing Practices (SAP)
issued by the Institute, the practices laid down in the SAP will


5. Fixed assets are assets held for the purpose of providing
or producing goods or services and are not meant for sale in the
normal course of business. Therefore, an asset can be classified as a
fixed asset or otherwise depending upon the use to which it is
put or intended to be put. For example, assets which are classified
as fixed assets in one type of business may be considered as current
assets in another. Similarly, the same asset may be classified
differently in an enterprise at different points of time.

6. Fixed assets normally constitute a significant portion of the
total assets, particularly in a manufacturing enterprise. Audit of
fixed assets therefore assumes considerable importance.

7. The following features of fixed assets have an impact on the
related audit procedures;

(i) By their very nature, fixed assets are turned over much
slower than current assets. Normally, fixed assets are
carried over from year to year.

(ii) The average unit of fixed assets is normally of a relatively
larger rupee value.

(iii) Since fixed assets are high value items, their acquisition
is more effectively controlled. The control aspect
assumes special significance where fixed assets are self-

(iv) In an inflationary situation, normally the book values of
fixed assets are considerably lower than their replacement

Internal Controls

8. An auditor should review the system of internal controls
relating to fixed assets particularly the following:

(i) Control over expenditure incurred on fixed assets acquired
or self-constructed – an effective method of exercising
this control is capital budgeting, which, apart from
ensuring proper authorisation of the expenditure incurred,
also shows in general how effectively such expenditure is
being controlled through periodical comparisons of
actuals with budgeted figures.

(ii) Accountability and utilisation controls – accountability
over each fixed asset (or each class of fixed assets) is
established, among other things, by maintaining,
appropriate records. This facilitates control aspects of
custodianship of such assets, for example, physical
verification by the management or establishment of
procedures relating to disposal of fixed assets. On the
other hand utilisation controls ensure that the
individual fixed assets have been properly used for
meeting the objectives of the enterprise.

(iii) Information controls – these controls ensure that
reliable information is available for calculating and
allocating depreciation, recording disposals or
retirements, preparing tax returns, establishing the amount
of insurance coverage, filing insurance claims controlling
repairs and maintenance charges etc.


9. Verification of fixed assets consists of examination of related
records and physical verification. The auditor should normally verify
the records with reference to the documentary evidence and by
evaluation of internal controls. Physical verification of fixed assets
is primarily the responsibility of the management.

Verification of Records

10. The opening balances of the existing fixed assets should be
verified from records such as the schedule of fixed assets, ledger or
register balances.

11. Acquisition of new fixed assets and improvements in the existing
ones should be verified with reference to supporting documents such as
orders, invoices, receiving reports and title deeds.

12. Self-constructed fixed assets, improvements and capital work-in-
progress should be verified with reference to the supporting documents
such as contractors’ bills, work-order records and independent
confirmation of the work performed.

13. The auditor should scrutinise expense accounts (e.g. Repairs and
Renewals) to ascertain that new capital assets and improvements have
not been included therein.

14. Where fixed assets have been written-off or fully depreciated in
the year of acquisition/construction the auditor should examine
whether these were recorded in the fixed assets register before being
written-off or depreciated.

15. In respect of fixed assets retired, i.e., destroyed, scrapped of
sold, the auditor should examine (a) whether the retirements have been
properly authorised and appropriate procedures for invitation of
quotations have been followed wherever applicable; (b) whether the
assets and depreciation accounts have been properly adjusted; (c)
whether the sale proceeds, if any, have been fully accounted for; and
(d) whether the resulting gains or losses, if material, have been
properly adjusted and disclosed in the profit and loss account.

16. It is possible that certain assets destroyed, scrapped or sold
during the year have not been recorded. The auditor may use the
following procedures to ascertain such omissions:

(i) Review work orders/physical verification reports to trace
any indicated retirements.

(ii) Examine major additions to ascertain whether they
represent additional facilities or replacement of old assets
which may have been retired.

(iii) Make enquiries of key management and supervisory personnel.

(iv) Obtain a certificate from a senior official and/or
departmental managers that all assets scrapped, destroyed
or sold have been recorded in the books.

17. The ownership of assets like land and buildings should be
verified by examining title deeds. In case, the title deeds are held
by other persons, such as solicitors or bankers, confirmation
should be obtained directly by the auditors through a request
signed by the client.

Physical Verification

18. It is the responsibility of the management to carry out physical
verification of fixed assets at appropriate intervals in order to
ensure that they are in existence. However, the auditor should satisfy
himself that such verification was done by observing the verification
being conducted by the management wherever possible and by examining
the written instructions issued to the staff by the management and the
relevant working papers.

The auditor should also satisfy himself that the persons conducting
the verification, whether the employees of the enterprise or outside
experts (if employed), had the necessary competence.

19. The auditor should examine whether the method of verification
was reasonable in the circumstances relating to each asset. For
example, in the case of certain process industries, verification by
direct physical check may not be possible in the case of assets which
are in continuous use or which are concealed within larger units. It
would not be realistic to expect the management to suspend
manufacturing operations merely to conduct a physical verification
of the fixed assets, unless there are compelling reasons which
would justify such an extreme procedure. In such cases indirect
evidence of the existence of the assets may suffice. For example,
the very fact that an oil refinery is producing at normal levels of
efficiency may be sufficient to indicate the existence of the various
process units even where each such unit cannot be verified by physical
or visual inspection. It may not be necessary to verify assets like
building by measurement except where there is evidence of
alteration/demolition. At the same time in view of the possibility of
encroachment, adverse possession, etc., it may be necessary for a
survey to be made periodically of open land. Where the fixed
assets can be moved and where verification of all assets cannot
be conducted at the same time, they should be marked with
distinctive numbers.

20. The auditor should examine whether the frequency of verification
was reasonable in the circumstances of each case. Where the assets are
few and can be easily verified, an annual verification may be
considered as reasonable. However, where the assets are numerous and
difficult to verify, a verification, say, once every three years by
rotation – so that all assets are verified at least once in every
three years – may be sufficient.

21. The auditor should test check the book records of fixed assets
with the physical verification reports. He should examine whether
discrepancies noticed on physical verification have been properly
dealt with. In this regard the auditor has to use his judgement as to
whether having regard to the circumstances the discrepancy is material
enough to warrant an adjustment in the accounts and/or modification in
the internal control system.

Valuation and Disclosure

22. The auditor should satisfy himself that the fixed assets have
been valued and disclosed in the financial statements according to
the generally accepted bases of accounting which are determined by
law, professional pronouncements1 (An illustrative list of
professional pronouncements on the subject is given in Appendix A.)
and prevailing practices.

23. The auditor should test check the calculations of depreciation
and the total depreciation arrived at should be compared with that of
the preceding years to identify reasons for variations. He
should particularly examine whether the depreciation charge is
adequate keeping in view the generally accepted bases of
accounting for depreciation.

24. Revaluation of fixed assets implies restatement of their book
values on the basis of systematic scientific appraisal which would
include ascertainment of working condition of each unit of fixed
assets, technical estimates of future working life and the possibility
of obsolescence. Such an appraisal is usually made by independent and
qualified persons such as engineers, architects, etc. To the extent
possible, the auditor should examine these appraisals. As long as the
appraisals appear reasonable and based on adequate facts, he is
entitled to accept the revaluation made by the experts.

25. Where several assets have been purchased for a consolidated
price, the auditor should examine the method by which the
consideration has been apportioned to the various assets. In case
this has been done on the basis of an expert valuation, he should
examine whether the same appears reasonable and based on adequate

26. Where an enterprise owns assets jointly with others (otherwise
than as a partner in a firm) the auditor should examine the relevant
documents such as title deeds, agreements etc., in order to ascertain
the extent of the enterprise’s share in such assets.

List of publications issued by the Institute of Chartered
Accountants of India which indicate the generally accepted bases of
accounting of fixed assets.

A. Accounting Standards

1. Disclosure of Accounting Policies (AS 1).
2. Prior Period and Extraordinary Items and Changes in
Accounting Policies (AS 5).

3. Depreciation Accounting (AS 6).
4. Accounting for fixed Assets (AS 10).

B. Other Publications

1. Guidance Note on Treatment of Expenditure During
Construction Period.
2. Statement on Accounting for Foreign Currency Translation.
3. Guidance Note on Accounting Treatment of Interest on
Deferred Payments.
4. Guidance Note on Accounting for Capital Based Grants.
5. Guidance Note on Treatment of Reserves Created on
Revaluation of Fixed Assets.
6. Compendium of Guidance Notes – Guidance Notes on ‘Provision
for Depreciation’ and ‘Mode of Valuation of Fixed Assets’.

Fixed Assets Management, Verification & Audit

At Amit Arun & Associates we help clients in process of Fixed assets management, a process that seeks to track fixed assets for the purposes of financial accounting, preventive maintenance, and theft deterrence. One of the major challenges that are by the Companies is to have a regular verification of the Fixed Assets owned by them. At times when, the management is not sure of the existence of all the Fixed Assets that reflect in records, the only answer is to conduct comprehensive fixed assets and inventory verification exercise. We help clients to carry out fixed assets and inventory verification. We render services in the following areas:

Preparation and maintenance of fixed asset register.
Identification & Physical
Identification & Physical verification of assets on all India basis to match the physical records with the book records.
Calculate depreciation as per statutory requirements.
Suggest capitalization of fixed assets on periodical intervals and inventory reconciliation.
Tagging and bar coding of fixed assets for easy identification of assets.
Implementing Internal Controls systems over expenditure on fixed assets

Our Experience with various companies has enabled us to develop the process with which the activities can be done in a very optimum time for the required result. We assist many corporate in managing and reconciling their fixed asset database. We undertake complete physical verification and affix bar coded tags on each type of assets available.

Contact us to find out more about our services and how we can help to efficiently manage the fixed assets.