In this guide
The Eight Findings That Recur
Across verification engagements the same eight findings appear, and almost none of them are theft. Assets in the register that no longer exist, still absorbing a depreciation charge every month. Equipment standing on the floor that was never capitalised, usually bought out of repairs and maintenance. Tags missing, painted over or worn to the point of being unreadable. Locations in the register that were correct three site moves ago. Custodian fields naming people who left. Identical descriptions repeated across dozens of lines, so no line can be matched to any particular machine. Assets fully depreciated but very much in use, carried at a token value that tells a lender nothing. And componentised assets recorded as one line, so a replaced part is capitalised twice. Each of these is a record-keeping failure rather than a loss, which is why they persist: nothing in the monthly close forces any of them to surface.
Assets in the Register That No Longer Exist
This is the largest single category of finding and it is almost never theft. Equipment is scrapped or sold, the physical departure is organised by whoever used it, and no document reaches the accounts, because disposal is the one event in an asset's life that produces no paperwork demanding to be filed. Machines cannibalised for spares vanish in pieces over months, so there is no single moment anybody would think to report. Depreciation continues running on all of it. The system computes a charge every period on assets that are not there, which understates profit and overstates the carrying value simultaneously, and where the charge has been claimed for tax it is not admissible and comes back as an addition on assessment. The longer the ghost survives, the larger the eventual correction and the more periods it touches. Insurance compounds it. Cover is bought against a declared value, and a declared value that includes departed equipment is premium spent on a claim that could never succeed. The same exercise usually finds the mirror problem, which is recently acquired equipment that was never added to the declaration and is therefore uninsured.
Assets on Site That Were Never Capitalised
Walking the floor and looking for register lines finds only half the problem. The other half is equipment standing in plain sight that the register has never heard of, and it arises three ways. Expensed items that should have been capitalised are the most common: equipment bought against a repairs and maintenance code, or below a capitalisation threshold applied per invoice rather than per asset, so a purchase that was genuinely capital is written off in one period. Assets received but not recorded are the second route, typically where delivery happens at a site and the invoice takes a different path, or where equipment arrives as part of a project and is never separated out of the project cost. Free-issue equipment from a customer sits in the same category. The consequences run backwards. An earlier period was understated because the whole cost hit it at once, the current balance sheet omits an asset the business owns, and every year since has been missing the depreciation that should have been charged. Correcting it means capitalising from the date the evidence supports, not from today, and restating the depreciation across the intervening periods.
Movement Without a Record
Between counts, a register drifts, and movement is what drives it. Inter-location transfers never posted are the main mechanism. An asset moves from one site to another because somebody needed it there, the move is arranged operationally, and the register field is not touched. A count then reports it missing at the recorded location and unrecorded at the actual one, which is two exceptions from one unrecorded event and considerable work to resolve. Where both sites are counted at once the pair can be matched; where they are counted months apart it usually cannot. Custodian changes not updated are the quieter version. The asset has not moved but the person answerable for it has left, and the field names somebody who cannot be asked about it. Custody without an owner is how an asset becomes nobody's responsibility and then becomes missing. Naming a role rather than an individual survives this better. The reason the register drifts is structural rather than careless: every one of these events is authorised by somebody operational, and none of them naturally generates a document that reaches finance, so unless the register update is built into the authorisation itself it depends entirely on somebody remembering.
What Each Error Costs
Each of the recurring findings carries a cost that can be quantified, which is what moves them from housekeeping to something worth funding. Assets still in the register after they ceased to exist are absorbing a depreciation charge every period, which understates profit and overstates the carrying value at once. Depreciation claimed on an asset that does not exist is not admissible, so the correction is added back in the tax computation and may carry interest on assessment. Equipment on the floor that was never capitalised has the mirror effect: the cost was expensed in full when it should have been spread, so an earlier period was understated and the current balance sheet omits an asset it owns. Insurance cuts both ways. A declared value including assets that no longer exist means premium paid for cover that can never be claimed; a declared value omitting assets acquired since the last review means a loss will be settled at less than it cost. The audit consequence is the one that concentrates attention. Where verification cannot be evidenced or discrepancies were not properly dealt with, the reporting on the relevant CARO clause changes, and a modified report travels to every lender and investor who reads the accounts.
Correcting the Register Properly
Corrections have to be documented as they are made, because a register corrected without a trail is no more reliable than the one it replaced. Write-offs need approval within authority, recorded before the removal, with the reason stated and whatever evidence the reason implies attached to it. Assets found on the floor and never capitalised are brought in at cost where the invoice can be traced, and where it cannot, at a documented assessment with the basis stated, capitalised from the date the evidence supports rather than from today. Both adjustments have depreciation consequences reaching back through prior periods, and those are computed and disclosed rather than absorbed silently into the current year. A full re-verification is the cheaper route when the exceptions exceed roughly a tenth of the register by value, when the register carries duplicate descriptions that prevent lines being matched at all, or when the corrections themselves would take longer than a clean count. In each of those cases the register is being reconstructed rather than corrected, and starting from the physical verification of fixed assets is faster than patching it line by line.
