We are in 2026 already, and there are a number of companies that are paying hefty amounts of capital for assets that actually do not work.
There can be as much as 35% of fixed assets that are either lost or misplaced just because of mismanagement, which ends up in unnecessary investments and fees if you have rented them. Now the reason can be multiple but one main reason here is that companies skip internal audit procedures for fixed assets, which causes them “ghosting of assets.”
But, with this guide, you will be able to ignore it and perform a great fixed asset audit.
Costs you pay to skip fixed asset audits
When a business decides to ignore its asset verification, then there are financial penalties that come hidden but drop notable impact.
Inflation of Tax and Insurance Premiums
One of the quickest impacts is the drainage of inflation of tax and insurance premiums. It is because if your records have heavy machinery or IT equipment that was sold, scrapped, or lost years ago (which we also know as ghost assets), then you are most likely to overpay an insurance premium and property tax, which can be up to 15 percent. Here you are mostly throwing up your capital for the items that deliver you zero operational value.
Unplanned Downtime and Productivity Loss
More than just tax costs, there are also huge costs that come from unplanned downtime and productive loss. When your maintenance team goes to service a machine that is not where the record says it is, or when a project does not finish because the tools that were listed as available are not found, it will result in delays that may even last weeks or months. This is very common in the large manufacturing units, where the gaps in asset visibility make a contribution to downtime costs that can even average over 260,000 dollars per hour on the global level.
Blind spot in the records
And, more than that, if there is a lack of audit, it will create a blind spot in the capital budget. How? It’s because you might be approving a budget for new equipment but that money is going into correcting the same assets that were never recorded or managed right.
Benefits You Get with Regular Internal Asset Auditing
If you commit to a regular internal audit procedure for fixed assets, then your asset management Software will go from a chore to a business plan contributing to the growth of your organization.
#1 Bulletproof Financial Reporting
The best benefit here is the development of bulletproof financial reporting because when you go for regular audits, your balance sheet shows the actual, fair market value of the assets you have. This is important if you want to secure your investments, get loans, and maintain good trust with your stakeholders. It also replaces guesswork with verified data so that the finance team can calculate depreciation with total accuracy.
#2 Right resource allocation
Any business going with strategic auditing will also achieve notable opportunities for optimized resource allocation. It is because when you identify underutilized assets using a physical check, you can also reallocate them to departments that need them most, which lowers your total capital expenditure by up to 15 percent using internal redeployment.
#3 Serves as Fraud Prevention
These audits also serve as an upper layer for fraud prevention and it’s natural to wonder how. Well, when employees know that each asset is possible to track and verify on schedule, there is a very minor risk of internal theft and unauthorized personal use of company property. And, when this practice is done on a regular basis, it does catch maintenance gaps early, thus making the operational life of machinery longer and delaying the requirement of big capital replacements.
A Quick Checklist of Effective Internal Fixed Asset Auditing (Important Questions)
- Physical existence and sighting- Can every single asset listed on the register be physically located and seen by the auditor?
- Assessment of condition: Is the asset that is going under check, in an unstable state, or is it obsolete, damaged, and in need of a formal write off?
- Barcode and tags check: Are the barcodes or RFID tags still strong with security, readability, and in proper sync with the digital system?
- Verification of owner and location: Does the assigned department or “owner” actually have possession of the asset at the recorded site?
- Correct depreciation calculations: Is the current method for calculating depreciation really showing the actual wear and tear or remaining useful life of the asset?
- Disposal documentation: Have all sold, stolen, or scrapped items been systematically removed from the books with all the important paperwork?
The Actual Process: How to Perform an Internal Fixed Asset Audit?
To perform a deep audit requires a structured approach if you really want to avoid drowning in data.
Phase 1- Solid planning and defining the scope
You have to clearly decide what makes a fixed asset for the particular cycle you want to perform auditing for. It means you must decide if you want to track every mobile device or only the items that are going above a particular value threshold. And, before moving to the field, the audit team must reconcile the current asset register with the general ledger to make sure that the baseline data stays clean.
Phase 2—The field walk or physical verification
This phase is the most lengthy one because this is where the most value is generated, as auditors will visit each location to verify the presence of every item. And, in 2026, the most important global teams have already moved away from clipboards to mobile apps and RFID scanners to check off the assets really quickly as they walk through a facility. However, when you verify the existence, the team must also perform a condition and utilize the review with a detailed note talking about equipment that is sitting idle or clearly nonfunctional.
Phase 3—Reconciliation and Investigation Phase
This is where you compare your physical findings with your records to find any shortcomings. This is where you will have to compare your physical findings with your records to find out gaps. If an asset, for example, is missing, the team will also have to perform the investigation if it has moved out without a systematic transfer or if it has just gotten lost or been stolen. In short, the assets that are not on the list as “found” status must be traced carefully and added to the register.
Phase 4—Reporting and adjustments
Now the final step is reporting and making the adjustments, which is not as easy as it sounds. The goal here is to document the findings and, more importantly, find out the “why” behind the errors so that internal policies can be adjusted to prevent the same mistakes in the next cycle.
If you want to see a reference of an audit report, then here is the SOAH Fixed Asset Audit Report that you can study and see as a live example.
Common Challenges (with Solutions) and How a Tool Makes Auditing Easy
Now even with a solid plan, businesses do face the trap of spreadsheets, where managing thousands of assets on a manual document can lead to version control chaos and human error. There is nothing wrong about spreadsheets but they lack a reliable change history, which makes it nearly impossible to see who moved an asset or when the last update took place. This problem becomes more intense when the assets are spread across multiple international sites or remote home offices.
The solution is the HRMS tool
Modern technology is capable of solving all the hurdles with a single source of truth, which is an integrated asset management system like CloveHR. The tool centralizes your data and replaces manual entry with automated updates every time by up to 40%. These tools also handle complex depreciation calculations automatically and send compliance alerts to remind the team when the next audit is due so that your business remains audit ready at all times without last minute worries.
A few more suggestions before we wrap
Before you launch your next audit, remember that the main goal is to bring transparency to broken or missing items as a priority with the best accuracy. You might also consider going for “rolling audits,” where you check a different category of assets every month in place of performing one massive annual review. This keeps your records constantly updated and makes the final year-end closing much smoother for your finance team.
FAQs
1. How frequently should a business perform an internal fixed asset audit?
If you look at the global level, then most big companies do a full physical audit once a year (which is the minimum requirement for compliance). But, for high-value or highly mobile assets like laptops and special technical equipment, a quarterly “rolling” audit is a much safer way to prevent any big losses.
2. What are ghost assets and why are they not good for my or any business?
Ghost assets are items that stay on your financial records but are no longer physically available or operational. They are not good for business because they cause overpayment on taxes and insurance premiums with an unreal view of your company’s actual net worth.
3. Can we use basic smartphones for asset auditing in place of costly industrial scanners?
Yes, there are so many asset management platforms which come with dedicated mobile apps where your team can use their smartphone cameras to scan QR codes or barcodes. It notably reduces the cost of entry and makes the physical verification process faster and much more accessible.
4. What should I do if an asset is found during an audit but is not in the register?
This is known as an unrecorded asset and you should immediately investigate its origin, find the original purchase invoice to determine its value and date of acquisition, and then officially add it to your register to make sure that your financial statements are accurate.
5. How do I handle assets that are permanently at a remote employee’s home?
The best approach for remote assets management software is a “self-audit” protocol where employees can use a secure company app to send a timestamped photo of the asset and its tag. Or the IT department can use remote monitoring tools to verify the existence and condition of hardware like laptops.
