Fiscal year-end is approaching for many organizations, and you know what that means: the annual audit, too, is upon us. If the thought sends shivers down your spine, know that you aren’t alone. Preparing for an audit can be stressful (and time consuming), but it doesn’t have to be.
As far as fixed assets are concerned, there are a number of ways to prepare. We know you’re busy, so we’ll be brief. Let’s take a look at 3 quick tips that can help you prepare for your audit.
1. Plan ahead
Picture this: your annual audit is around the corner, and you’re just finalizing your property accounting ledger (one of many fixed asset reports your auditor will need). You’re so prepared, in fact, that when your auditor calls you on the telephone, you don’t head for the hills. It’s possible! Rather than rushing to prepare for an audit, treat it as an ongoing, year-round process.
Consider creating a proactive internal audit preparation plan. By devoting time to things like documentation throughout the year, you’ll reduce the time and stress involved in audit preparation processes at the end of the year.
For example, document asset purchases and dispositions as they happen. Not only will it make your auditor happy, but it will save you time trying to hunt things down later, like zombie and ghost assets.
Quick tip: Be sure to document asset transfers and maintenance, as well. Confirming that an asset was “touched” can help your organization feel more confident in your inventory. It’s also the groundwork for conducting an inventory by exception.
Which leads us to our next point…
2. Perform a random sample inventory
We know what you’re thinking—how is there time for that? But if you start early (refer to Tip #1), you’ll have time to conduct an inventory by random sample.
In an inventory by random sample, a small, random subset of assets is inventoried. The category is identified by a statistically valid sample, meaning it is representative of all items in your inventory.
For example, let’s say you conduct a random sample inventory and afterwards, you discover 85% of items in the sample. You can conclude that if you conduct a full inventory, you will likely find 85% of the items. For this to be accurate, remember that the sample must be statistically valid and random.
Most organizations conduct a full physical inventory of fixed assets every 3 to 5 years. However, many organizations conduct an inventory of high risk/high price assets on an annual basis. Learn more about different types of inventory here.
After you’ve completed your physical inventory, consider taking some time to review your organization’s current policies and procedures for asset tracking. It’s likely that the inventory revealed some gaps in your process, and now is a great time to clarify or adjust your processes alongside those responsible for capital assets.
For example, you might notice commonalities in items that you were unable to locate, like the year of purchase or asset category. If they all have something in common, you have the opportunity to fix it quickly and/or implement a policy to stop it from happening again.
3. Clean up your data
Clean, accurate data is key to a successful audit. There are plenty of benefits associated with an automated asset management software solution, including time and money savings, but perhaps the most valuable benefit is—you guessed it—clean and accurate data.
With the right automated asset management software, you have all of your asset information at your fingertips. It’s a great tool to have at your disposal during your annual audit, because you don’t have to dig through spreadsheets and emails to find the information you (or your auditor) need. However, with features like chain-of-custody tracking and approval routing, it also helps simplify your life year-round.
An automated asset management system helps keep your asset information organized throughout its lifecycle, and reduces the risk of human error. If used regularly during your annual inventory process, a good solution can help to ensure that all data is accurate and up to date.
So the next time you’re trying to view the details of an asset, like its serial number or financial information, you can rest assured that the information in your database is correct. Maintaining accurate data means that you’re more likely to end up with financial reports you can rely on, which in turn helps maintain government compliance during the audit process.
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Remember: you don’t have to dread an upcoming audit, but you do need to be well prepared. If you have questions, or would like to speak to an expert in more detail about audit preparation, feel free to contact us at any time – email@example.com. We’re always happy to help!