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15. Because the fixed asset department authorizes the removal of the asset from the general ledger, they must know when to record the authorization. Further, if improvements or asset disposals are made and the fixed asset department is unaware, then the depreciation amounts calculated and reported in the financial statements will be incorrect.
16. The auditor should review the authorization control procedures to determine the reasonableness of authorizations used for acquisition of fixed assets. The auditors should also examine the supervision controls over the physical guarding of the assets. Lastly, the auditors should periodically verify the location, condition, and fair value of the organization’s fixed assets against the fixed asset records in the subsidiary ledgers. Also, the depreciation schedules should periodically be analyzed to determine the accuracy and completeness.
17. The fixed asset department provides record keeping for fixed asset inventory.
18. The fixed asset depreciation schedule shows when and how much depreciation to record. It also shows when to stop taking depreciation on fully depreciated assets.
This information in a management report is also useful for planning asset retirement and replacement.
19. When an asset is taken out of service, the responsible manager issues a request to dispose of it. Like any other transaction, the disposal of an asset requires proper approval that will be determined by its nature and materiality. In some cases multiple levels of management may be involved, in other situations the manager in charge of the asset may have the authority to dispose of it.
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20. Unlike production assets, fixed asset inventory is distributed widely across the organization. Individual items such as automobiles, computers, and office furniture are in the custody of the end-users.