What is Physical Asset Verification?
Verification is defined as “An inquiry into the value, ownership, title, existence, possession, and presence of any charge on the assets.” Physical verification of assets is an important aspect of auditing and can be seen as doing a ‘stock-take’. Without the verification of assets, an audit is incomplete. Auditing is done at the end of every financial year; it helps in calculating the worth value of an organisation. Therefore, it is a critical part of the business.
Why is Physical Asset Verification necessary?
Verification is a function of examining assets and liabilities to ensure that an organisation has an accurate understanding of:
- Whether the assets are free from any charge or difficulty, etc.
The main objectives of an asset verification exercise include confirmation of an assets physical location and the information associated with it. This includes but is not limited for the following purposes:
- To know that assets that are shown in the balance sheet are true, genuine, and real
- To know whether assets exist or not
- To check all the documents mentioned are valid or not
- To check the assets condition as mentioned is correct or not
- To find out the ownership and title of the assets is one of the main objectives of verifications
- To show the correct valuation of assets and liabilities
- To manage compliance
- To see if purchased assets are identified correctly and sold assets are excluded
- To ensure that the true value of the asset is represented after depreciation
- Verification is done to detect fraud because assets might be misused or stolen
How is verification completed?
The assets are first physically verified to show that the following attributes from the actual equipment match what is shown in the listing:
- Property Tag Number – to verify that the tag is affixed to the asset, legible, and undamaged
- Serial Number – to verify the serial number
- Manufacturer/Model – to verify the manufacturer name and model
- Location – to verify the building number and the room number
- Description – to verify the description of the asset
- Condition Code – to update the physical condition code for the equipment
Physical verification is used to help recognise all the assets present with the organisation along with their exact location, service status, and so on. Therefore, physical verification is crucial for all companies.
Execution of the Physical Asset Verification Service follows a structures process and is broken down into four main stages:
During the requirements analysis stage, initial consultations with the client are conducted to understand the need and agreement on the critical information requirement. The objectives, execution period, team size and asset movement all play a part in defining the approach and execution plan which is the next stage of the exercise.
Once the initial requirements are captured, the execution plan is developed which takes into careful consideration all of the information captured during the previous stage. Work is distributed amongst the team members who have clear guidelines and well-defined targets that enable them to deliver as per client requirements.
The next stage is the actual on-site execution. Following structured execution plan and supported by latest tools and systems, our field engineers capture all the relevant information on pre-defined templated aligned to customer requirement and submit for verification and output generation.
The final stage is the out-report generation where our data analysts and experts verify the captured information against client requirements, identify any gaps for the field engineers and enrich the data based on industrial standards (if required by client). A stringent quality review is carried out before submission to the client to ensure that all necessary information required to enable informed decisions is being provided.