Ghosts and zombies aren’t just in scary movies...
They can cause alarm if they show up in your physical audits, but don’t worry, you’re not the only one seeing them! When reviewing the results of a physical audit, it is not uncommon for an organisation to discover that it has ghost assets and/or zombie assets.
Ghost assets are items that are on the fixed asset register and are being depreciated and also probably insured, yet were not found to be physically present. They may have been simply missed and located during a subsequent search, ‘lost’ or disposed of without notifying anyone. If the assets have been lost or disposed, they will need to be written off to provide accounting and reporting accuracy.
Conversely, it is also common to find zombie assets. These are items that were discovered during the physical audit that were not on the fixed asset register and will need to be added to it. Key information including purchase date and acquisition cost of such assets over the capitalisation threshold should be recorded.
If the exercise of undertaking physical audits within your organisation is a rarity, or indeed non- existent, you are likely to be nervous of conducting one for fear of discovering numerous unreconciled items. The fact is, that about 10-15% of assets on an organisation’s books cannot be accounted for and a significant amount of assets physically there cannot be identified.
Reconciling what is on the register with what is physically there can prove a time-consuming task but more importantly, at the end of the process, there are likely to be a number of missing items that cannot be offset, resulting in the P&L taking a charge to write off the non-existent assets. Having to write off a substantial amount of fixed asset value is a red flag to auditors in terms of corporate governance requirements, calling the integrity of your internal fixed asset control system into question.
So what is the long term solution? A specialist fixed asset register combined with a mobile asset tracking app to ensure that regular asset verification exercises are carried out and all assets reconciled.