Every company is required to keep accurate financial records. It’s not only a matter of compliance, but it’s also to ensure that you’re getting a return on your investment. Part of the process of updating and producing accurate financials involves conducting an asset audit.
If you’re trying to wrap your head around preparing for your first audit or just getting it done right, you’re in the right place.
At BlueTally, we help businesses to get in control and spend less time managing assets with our free and easy-to-use asset management software. In this article, we’ll walk you through what an asset audit is, why it’s important and how you can get started with yours.
What is an asset audit?
An asset audit is the physical verification of a company’s assets. These include financial assets like stocks and bonds, as well as property, vehicles, equipment, inventory, IT assets, and consumables.
The purpose of an asset audit is to confirm whether the company still owns these assets, where they are, the condition they’re in, and how many there are. This ensures that the company’s financials show a true reflection of its asset holding with accurate valuations.
Different types of asset audits
During an internal audit, designated internal employees will check your asset register and verify the existence, location, condition, and number of assets in the business.
Internal audits can be done periodically at the business’s discretion. They serve to help your business improve its internal processes when it comes to asset tracking and recording as well as detecting any fraud or discrepancies.
During an external audit, your business hires external qualified auditors to scrutinize your business processes, policies, financial records, and internal actions of employees. They check for any mistakes, errors, and inefficiencies to help improve and optimize your business.
These audits are usually done once a year to verify that the company’s financial statements are accurate and a true reflection of what’s going on in the business. External audits are usually done by public companies and businesses that meet certain criteria.
Why an asset audit is important
1. Values Depreciation
Assets lose value over time and it’s important to account for this in the financial statements to keep accurate records. Depreciation is where the cost of the asset is deducted over its useful life. Asset audits help determine asset values so that depreciation can be calculated.
2. Removes ghost assets
A ghost asset is where a business owns an asset but its whereabouts are unknown. They are in the financials but cannot be physically located. Asset audits verify locations and eliminate ghost assets from the books.
2. Increases credibility
Regular audits help maintain accurate asset registers that are up to date and improve the credibility of a company’s asset valuations and financial statements. This makes the business look attractive to investors and funders.
Let’s have a look at how you can get started with your asset audit.
How to get started with your asset audit
- Find an asset management software: your first step is to ditch the spreadsheets and find a reliable, easy-to-use asset management software like BlueTally, to help you track and manage your assets. You won’t have to search through old outdated spreadsheets, everything you need is available on your dashboard with the click of a button.
- Create an asset register: An asset register is a centralized universal database with all the information about the assets your business owns. It includes information such as the location, its description, serial numbers, and number in stock among other important details. With BlueTally’s asset register, you’ll be able to see additional information such as maintenance records, warranty information, supplier details, the full history of who’s had it, any changes done to it, and more.
- Develop asset tracking procedure: you then need to create a policy and procedure for how you will track assets in your business. This includes everything from checking-in and checking-out assets, approvals, maintenance, reporting, and other information on what’s been done. All of this should be easy to achieve with asset management software.
- Conduct internal audits: You’ll need to hire or assign internal employees to continuously check and verify assets and produce reports with their findings. This will help you improve your processes and prepare for external audits if need be.
- Prepare for external audits: If your business is required by law to produce externally audited financial statements, or you’d like to show more credibility to funders, investors or shareholders you can get external auditors to come and audit.
Asset audits don’t have to be intimidating. Take your first step to creating an efficient asset audit process by getting started with BlueTally for free.