Companies encounter several risks associated with fixed assets, which are essential for their operations and overall financial health. One significant risk is the depreciation of these assets over time. As fixed assets age, their value decreases, impacting the company’s balance sheet and potentially leading to financial losses if they need to be sold or replaced. Additionally, technological advancements can render certain assets obsolete, forcing companies to invest in new equipment or technology to maintain competitiveness. This situation can strain financial resources, particularly for smaller businesses that may not have the capital to upgrade their assets regularly.

Another critical risk involves physical damage or loss of fixed assets due to unforeseen circumstances such as natural disasters, accidents or theft. Such events can disrupt operations and lead to significant financial setbacks, especially if the assets are crucial for production or service delivery. Companies must also consider compliance risks; failure to adhere to regulations regarding asset management can result in legal challenges, fines or reputational damage. These risks necessitate a comprehensive approach to asset management that incorporates both preventive measures and contingency plans.

To effectively address these risks, companies should implement a robust asset management strategy that includes regular maintenance and timely assessments of their fixed assets. This proactive approach helps extend the useful life of assets and reduces the likelihood of unexpected failures. Furthermore, investing in insurance coverage can mitigate financial impacts from physical damage or loss, providing a safety net during adverse events. Companies should also stay informed about industry trends and technological advancements to ensure their assets remain relevant and competitive, thus minimizing the risk of obsolescence. By adopting these strategies, organizations can enhance their resilience against fixed-asset-related risks and safeguard their financial stability.

1. Fixed Assets Audit Work Program

Our Fixed Assets Audit Work Program outlines the process of auditing fixed assets to ensure accurate capitalization, depreciation and accounting. The primary goal of this audit program is to maintain the integrity of financial statements. The document includes six samples, each with specific procedures and steps. Sample 1 outlines the initial understanding of fixed assets, emphasizing policies on classification, useful life determination and depreciation calculation. It includes tasks such as reviewing acquisition accounting, understanding capitalization, and ensuring the existence and utilization of assets. Sample 2 focuses on planning and fieldwork, including conducting planning meetings, understanding previous audits, reviewing policies, and developing a risk profile. 

2. Fixed Asset Review Report

Utilize our Fixed Asset Review Report to conduct a thorough internal audit of your company’s fixed asset management processes. This sample was designed for the retail industry but can be customized to fit any industry and used to systematically review and analyze current policies, procedures and practices related to fixed assets, identifying gaps and inefficiencies that could lead to financial inaccuracies or compliance issues. Through detailed observations and recommendations, the document provides actionable insights for improving asset tagging, physical inventory counts, capitalization policies, invoice approval processes, and project classifications between capital and operating expenditures.  

3. Fixed Assets Policy

This tool contains three sample policies that establish guidelines and procedures for reviewing and understanding an organization’s fixed assets. In these samples, capital assets include equipment, property, furniture, fixtures and leasehold improvements that are acquired by the company in the normal course of business. Capital assets have a useful life of at least one year. Computer software purchased for internal use is considered a capital asset. Computer software internally developed for internal use or resale is not addressed in this policy statement. All capitalized assets should be depreciated using the straight-line method over their estimated useful lives.

4. Fixed Asset Management Capability Maturity Model (CMM)

This capability maturity model can be used to measure the maturity of an organization’s fixed asset management process and to assist its progress from the initial/ad-hoc stage toward the optimized state. The capability maturity model describes a maturity curve on these capability levels: initial, repeatable, defined, managed and optimized. In this sample, an optimized organization has fully integrated policies and strategies in place for managing fixed assets. These policies are communicated to staff and updated regularly.

5. Fixed Assets Process Controls Questionnaire

This sample questionnaire includes a list of items to consider when reviewing an organization’s fixed asset process controls. This template provides several business activities and the related objectives for each control. Within the questionnaire, you can document the control attribute, whether the control exists, whether it was designed properly, related test procedures, whether controls are operating effectively, and more. Example control objectives in this tool include recorded fixed asset acquisitions represent fixed assets acquired by the organization and the purchasing department is involved in the purchase of fixed assets.

6. Managed Fixed Assets: Asset Acquisition RCM

An RCM provides an overview of different control objectives that organizations should take into consideration and the corresponding controls to safeguard the company against risks which may arise if not checked timely. Once customized to an organization, this document can help the user in assessing each control. The control assessment can then also be summarized to develop an action plan. This document outlines risks and controls common to the asset acquisition aspect of the Manage Fixed Assets - Asset Management process in a risk control matrix (RCM) format.

7. Manage Fixed Assets: Asset Management RCM

A successful risk management strategy requires a strong internal control environment. The RCM format emphasizes that strong and risk-oriented internal control environments are often optimized with automated/manual controls, depending on the situation. An RCM provides an overview of different control objectives that organizations should take into consideration and the corresponding controls to safeguard the company against risks which may arise if not checked timely. Once customized to an organization, this document can help the user in assessing each control. The control assessment can then also be summarized to develop an action plan. This document outlines risks and controls common to the asset management aspect of the 6.2 Manage Fixed Assets process in a risk control matrix (RCM) format.

8. Managed Fixed Assets: Maintenance RCM

A successful risk management strategy requires a strong internal control environment. The RCM format emphasizes that strong and risk-oriented internal control environments are often optimized with automated/manual controls, depending on the situation. An RCM provides an overview of different control objectives that organizations should take into consideration and the corresponding controls to safeguard the company against risks which may arise if not checked timely. Once customized to an organization, this document can help the user in assessing each control. The control assessment can then also be summarized to develop an action plan. This document outlines risks and controls common to the maintenance aspect of the Manage Fixed Assets process in a risk control matrix (RCM) format.

9. Manage Fixed Assets: Disposals RCM

A successful risk management strategy requires a strong internal control environment. The risk control matrix (RCM) format emphasizes that strong and risk-oriented internal control environments are often optimized with automated/manual controls, depending on the situation. An RCM provides an overview of different control objectives that organizations should take into consideration and the corresponding controls to safeguard the company against risks which may arise if not checked timely. Once customized to an organization, this document can help the user in assessing each control. The control assessment can then also be summarized to develop an action plan. This document outlines risks and controls common to the “disposal risk” aspect of the 6.2 Managed Fixed Assets process in a risk control matrix (RCM) format.

10. Fixed Asset Identification Inventory Impairment Policy

Our Fixed Asset Identification Inventory Impairment Policy is an essential tool designed to help organizations maintain strict control over their fixed assets. This document outlines best practices for asset identification, including the use of unique numbering and permanent tagging, as well as maintaining detailed records in specialized software. It covers the entire asset lifecycle, from acquisition and marking to transfers and disposals, assuring that every movement and change in status is accurately tracked and properly accounted for. This policy also addresses the importance of periodic physical inventory and the need to reconcile records, providing a robust framework for compliance and audit readiness.