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What Is a Fixed Asset Audit? Process & Checklist

What a fixed asset audit is, the assertions auditors test, the step-by-step process from planning to physical verification and reconciliation, and a checklist of documents to have ready.

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A fixed asset audit is a review that checks fixed assets physically exist, are complete in the records, are correctly valued, and match what the fixed asset register and the general ledger show.

A fixed asset audit is a review - internal or by external auditors - that checks whether the fixed assets an organisation claims to own physically exist, are complete in the records, are correctly valued, and match what the fixed asset register and the general ledger show. Fixed assets, often reported as property, plant and equipment (PP&E), include buildings, machinery, vehicles, IT equipment and furniture. They often make up a large share of the balance sheet, so misstated assets mean misstated accounts. The audit is the periodic test; audit readiness is the year-round habit of being able to pass it without a scramble.

In plain terms, the audit answers three questions. Is everything on the list really there? Is everything that is really there on the list? And are the numbers attached to it right? The rest of this page explains how auditors answer those questions, the process step by step, and a checklist of what to have ready.

What you will learn

What auditors check: the fixed asset audit assertions

Auditors frame their work around assertions - the claims management implicitly makes by putting a fixed asset figure on the balance sheet. For the closing balance there are four:

  • Existence - assets on the books are real, present, and identifiable.
  • Completeness - assets in use are on the books; nothing material is missing from the records.
  • Valuation - purchase cost is supported by invoices, depreciation follows the stated policy and useful lives, and impaired or obsolete assets have been written down.
  • Rights and ownership - the organisation owns what it claims, with leased and loaned equipment classified correctly.

Alongside those balance assertions, auditors test the year’s transactions: additions (were they genuine, correctly priced and correctly capitalised?) and disposals (were retired assets removed from the books with approval and documentation, not merely from the building?). Disposals are not a separate balance assertion, but a missed disposal breaks existence and valuation at once, which is why it gets its own attention.

Fixed asset audit vs physical verification

The two terms are often used interchangeably, but they are not the same thing. Asset verification - sometimes run as a physical inventory count - is the act of locating assets, confirming their tags and serial numbers, and noting their condition and custodian. It answers “is it there?”.

A fixed asset audit uses that evidence and then goes further. It also tests valuation, ownership, capitalisation, depreciation and disposals, and it ends in a conclusion: is the fixed asset balance fairly stated? Verification is typically an internal, recurring activity that finance or operations runs themselves. The audit is the periodic formal review, internal or external, that relies on it. An organisation that verifies regularly gives its auditors good evidence to sample; one that does not forces the auditor to generate that evidence during fieldwork, which is slower, more expensive and more likely to produce findings.

The fixed asset audit process, step by step

The detail varies by auditor and by organisation, but most fixed asset audits follow the same seven steps.

  1. Plan the audit. Set the scope (which asset classes and sites), materiality (the size of misstatement that would matter) and sampling approach. High-value or easily moved items, such as laptops, often get full coverage; low-value furniture may be sampled.
  2. Extract and clean the register. Pull the fixed asset register with IDs, descriptions, serial numbers, locations, custodians, cost and accumulated depreciation. Fix obvious gaps first: duplicate entries, blank locations, assets with no owner.
  3. Make sure assets are tagged. Every asset in scope should carry an asset tag that links it to its record. Untagged items turn a quick check into a guessing game.
  4. Verify physically in both directions. Walk from register to floor and from floor to register (see the two-direction test below). This can be a wall-to-wall count of everything or a risk-based sample.
  5. Reconcile. Match the verification results to the register, then reconcile the register totals to the general ledger by asset class. Asset reconciliation is where count differences become accounting differences.
  6. Investigate exceptions. Classify each difference - missing, found but unrecorded, misplaced, wrong custodian, damaged - and resolve it. Missing items are traced before anything is written off, and write-offs are approved by someone other than the record-keeper.
  7. Report and schedule the next cycle. Document what was checked, what was found, what was adjusted and what control weaknesses caused the exceptions. Then set the date and scope of the next verification.

The two-direction test

The fieldwork classic, and the heart of step 4, is sampling in both directions. Sheet-to-floor: the auditor picks entries from the register and asks to be shown the items - this tests existence, and is where ghost assets surface (recorded items that were disposed of, lost, or stolen without the books being told). Floor-to-sheet: the auditor picks items they can see and asks for their records - this tests completeness, and is where unrecorded assets, unregistered purchases and untagged equipment surface. An estate that passes one direction can comfortably fail the other, which is why both are run.

The sample itself is usually risk-based rather than random: larger coverage for high-value items, portable IT equipment, sites with a history of exceptions, and anything added or moved during the year.

Testing additions, disposals and depreciation

Physical verification proves assets exist. The numbers need their own tests, and this is the audit evidence that separates a fixed asset audit from a count.

  • Additions. Auditors vouch a sample of the year’s additions to purchase invoices and purchase orders, confirming the cost, the date and that the item was received. They check each addition against the organisation’s capitalisation threshold and the capital-vs-expense split: repairs and minor items that were capitalised overstate assets, while qualifying equipment that was expensed understates them. Assets under construction or in progress are checked to confirm they were transferred into fixed assets and started depreciating once they came into use.
  • Disposals. Each disposal should have an approval, evidence of what happened (sale, scrap, donation, return to lessor) and a correct gain or loss on asset disposal. Auditors also look for the reverse: assets physically gone but still on the register.
  • Depreciation. Auditors recalculate depreciation for a sample using the stated policy, method and useful life, and check that the depreciation schedule agrees with the ledger. Assets still in use after being fully depreciated can signal that useful lives are set too short.
  • Impairment. Idle, damaged or obsolete equipment is an indicator of impairment. If kit is sitting unused in storage but carried at full net book value, expect questions.

The thresholds, methods and useful lives themselves are policy choices; auditors test whether you applied your own written policy consistently, not whether you picked a particular number.

Fixed asset audit checklist

Run your own verification pass first and reconcile the differences, so the auditor’s sample finds what your records promise. Then have these ready:

  • An up-to-date fixed asset register with asset IDs, descriptions, serial numbers, locations and named custodians.
  • Purchase invoices and purchase orders for the year’s additions, attached to or traceable from each asset record.
  • A written capitalisation and depreciation policy covering thresholds, methods and useful lives by asset class.
  • Depreciation schedules reconciled to the general ledger, with fully depreciated items still in use flagged rather than forgotten.
  • Disposal and write-off approvals, plus sale, scrap or recycling evidence.
  • Lease agreements for leased equipment, so it is classified correctly and not counted as owned.
  • Transfer records for assets that moved between sites, departments or people.
  • The last verification report and evidence of how each exception was resolved.
  • The insurance schedule, which auditors sometimes compare with the register.
  • Asset history on request: when an auditor asks “who has had this laptop and when was it last serviced”, the answer should be a lookup, not an investigation.

Strong internal controls do most of this preparation implicitly - if disposals require approval and write-offs are made by someone other than the record-keeper, the records tend to arrive at audit season already clean. That separation is segregation of duties doing its quiet work.

How often and who performs it

How often. Wherever accounts are externally audited, fixed assets are examined as part of the annual financial statement audit. Internal audits run on their own cycle - commonly annual, or rolling across sites so each location is covered over a set period. High-risk or mobile items such as laptops and phones are often covered by more frequent cycle counts in between. Event-driven audits happen too: before an acquisition or sale of the business, after suspected fraud or theft, or when grant, loan or insurance conditions require evidence that funded equipment exists.

Who is involved. Finance owns the register-to-ledger reconciliation and the valuation work. Asset custodians - the people holding the equipment - confirm what they have. IT and facilities typically handle the physical checks for their equipment. Internal audit, where it exists, provides an independent review. External auditors sample and test for the financial statements, and some organisations bring in specialist verification firms for large, multi-site counts.

Common audit findings

The recurring ones: ghost assets still accruing depreciation; equipment physically present but never capitalised or registered; disposals with no paperwork; assets with no identifiable custodian; transfers between sites that the records never followed; register totals that do not agree to the general ledger; repairs capitalised as additions; and registers kept in spreadsheets where the audit trail cannot be evidenced because any cell can be silently rewritten.

Fixed asset audits in practice

Audits reward unglamorous habits - tag at purchase, record disposals the day they happen, keep documents on the record, verify on a schedule. Teams that keep their register in AMPthilly walk into an audit with purchase details, attached invoices, named custodians, and a full per-asset audit history exportable to CSV, which covers most of what an auditor asks to see. Printable QR labels scanned with an ordinary phone camera open each asset’s record in the browser, which makes a sheet-to-floor check quick. The same discipline applies beyond finance: security-driven reviews under ISO 27001 ask near-identical existence and ownership questions about an information asset register.

FAQ

What do auditors check in a fixed asset audit? Four balance assertions plus one transaction test. Existence - the assets on the books are real and findable. Completeness - assets in use are actually on the books. Valuation - cost, accumulated depreciation and any impairments are calculated correctly. Rights - the organisation actually owns the assets, evidenced by invoices and titles, with leased items treated properly. On top of those, auditors test the year’s movements: additions were capitalised correctly and disposals were removed from the books with documentation, not just from the building.

What are the steps in a fixed asset audit? A typical process has seven steps. Plan the scope, materiality and locations. Extract and clean the fixed asset register. Make sure assets are tagged. Verify physically in both directions, sheet-to-floor and floor-to-sheet. Reconcile the results with the register and the general ledger. Investigate exceptions and approve any write-offs. Report the findings and schedule the next cycle.

What documents do auditors request for fixed assets? Usually the fixed asset register, purchase invoices and purchase orders for a sample of additions, the written capitalisation and depreciation policy, depreciation schedules reconciled to the ledger, disposal and write-off approvals, lease agreements, transfer records, the insurance schedule, and the most recent physical verification report with evidence of how its exceptions were resolved.

What is the difference between a fixed asset audit and physical verification? Physical verification is the count - locating assets, confirming their tags and checking their condition. It is one input to an audit. A fixed asset audit goes further: it also tests valuation, ownership, capitalisation, depreciation and disposals, and concludes whether the fixed asset figure on the balance sheet is fairly stated. Verification is usually an internal, recurring exercise; the audit is the periodic formal review.

What happens if an asset cannot be found during the audit? It becomes an exception to investigate, not an instant write-off. Check whether it was moved, reassigned, sent for repair or disposed of without the register being updated. If it genuinely cannot be found, it is a ghost asset: the loss is approved by someone independent of the record-keeper, the asset is written off, its remaining net book value is taken to the accounts, and depreciation on it stops.

How often are fixed asset audits done? Fixed assets are examined as part of the annual financial statement audit wherever accounts are externally audited, with the depth varying by how material the asset base is. Internal audits run on their own cycle - commonly annual, or rolling across sites. Event-driven audits also happen: before an acquisition, after suspected fraud, or when insurance or grant conditions require evidence that funded equipment exists.

What is the difference between an internal and external fixed asset audit? An internal audit is run by your own people or appointed reviewers to find and fix problems early - it can be informal, partial, and pragmatic. An external audit is performed by independent auditors, usually as part of certifying the financial statements, and its findings carry consequences: misstated asset values can force adjustments to the accounts. A sensible rhythm is internal first, so the external one is boring.

The takeaway

A fixed asset audit checks that the assets on your balance sheet exist, are complete, are correctly valued and are actually yours - and that the year’s additions and disposals were handled properly. Physical verification in both directions supplies the evidence; reconciliation to the register and the general ledger turns it into a conclusion. Keep a clean, tagged register with documents on each record, verify on a schedule, and approve write-offs independently, and the audit becomes a confirmation of what you already know.

Tools that make this easier

AMPthilly keeps each asset’s purchase date and price, supplier, serial number, current owner and location, and attached invoices and warranty documents on one record, with a full audit history of checkouts, transfers, status changes and edits that you can filter and export to CSV. Printable QR labels open an asset’s record from any phone browser - no app to install and no scanner hardware to buy - so sheet-to-floor checks go quickly. Asset valuation and depreciation are included on the Pro plan. Start free - 3 users and 25 assets, no credit card required - or talk to us about a larger rollout.

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