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Internal Control of Fixed Assets: A Controller and Auditor's Guide by Alfred M. King

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CHAPTER SIX 6
Physical Control of Property, Plant, and Equipment
THERE ARE AT LEAST two essential elements of internal control when we are dealing with Property, Plant, and Equipment (PP&E). One is knowing what you are supposed to have, which is the purpose of the fixed-asset register or master file. The other is being able to locate the actual assets, to provide assurance that the property register represents what is physically present.
As mentioned several times in this book, so-called fixed assets in practice are far from “fixed” physically. It never ceases to amaze those who have taken a physical inventory of PP&E how many items cannot be found where the property record says they should be.
With the possible exception of a 1,000-ton press having a 15-foot concrete foundation, virtually all other pieces of equipment can be moved. And often are moved. Keep in mind that even the largest items were brought into a facility from a supplier and erected or installed there. What moved coming in can still move within a company.
Office furniture and fixtures, including computers and IT assets, are easily moved. Every time there is a corporate reorganization, people, desks, files, and phone equipment, not to mention computers are transferred. These moves are sometimes within the same physical facility or building; at other times people literally move to other locations and take their “stuff” with them.
There is only one way to be absolutely sure that the property register is correct, ...

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