FIXED ASSETS

SEGREGATION OF DUTIES

The following segregation of duties should exist within the fixed assets cycle:
Most systems of internal control rely on assigning certain responsibilities to
different individuals, or "segregating" incompatible functions. Such segregation
of duties is intended to prevent one person from having both (1) access to assets
and (2) responsibility for maintaining the accountability for such assets. The
following types of responsibilities should ordinarily be segregated:
- Transaction initiation (acquisitions or disposals)
- Transaction authorization
- Transaction recording
- Custody of assets
- Reconciliation of physical fixed assets and liabilities to records.
Therefore, personnel responsible for fixed asset acquisition, disposal, recording,
and maintenance should have responsibility for only one such function and have
no system access to functions other than their assigned function. In addition,
personnel who are responsible for fixed asset transaction processing should
have neither responsibility for fixed asset master file maintenance nor update
access to the fixed asset master file.
In a manual system, segregation of duties may be enforced administratively,
based on assignment of job responsibilities. In an automated system,
segregation of duties is typically enforced through use of automated access
restrictions, such as the following:
- Operating system features that require users to input a unique user ID and
password before access to the system is allowed and that may limit users to a
predefined set of menu options.
- Systems software that requires users to input a unique user ID and password
before access to the system is allowed and may further restrict access to certain
programs, data files, and other information resources.
- Application features that restrict users to certain subsystems, transactions, or
data files.

ACQUIRING FIXED ASSETS

CONTROL OBJECTIVES
Fixed asset acquisitions are accurately recorded.
Inaccuracies in the input and/or processing of asset acquisition details or amounts may lead to
the asset being incorrectly reflected in the general ledger. This may result in misstatements in the
financial statements. Incorrectly recorded assets may also be difficult to identify physically at a
later stage.

Control Activities
SAP edits and validates financial documents on-line.

MANAGING FIXED ASSETS

CONTROL OBJECTIVES
Fixed asset maintenance records are updated timely.
If maintenance activities are not recorded timely, duplicate maintenance activities may be
performed; this, in turn, might adversely affect the resources available for maintenance projects.
In addition, an incomplete asset maintenance history register may result in inappropriate
decisions about repair vs. replacement of fixed assets.

Control Activities
SAP edits and validates financial documents on-line.

MAINTAINING FIXED ASSET REGISTER AND/OR MASTER FILE

CONTROL OBJECTIVES
Changes to the fixed asset register and/or master file are accurate.
Inaccurate changes to the fixed asset register and/or master file could result in the following
errors: (1) an invalid fixed asset description may cause an incorrect classification of assets,
resulting in incorrect calculations in depreciation; (2) an invalid fixed asset location may result in
the fixed asset being lost or misplaced; (3) an invalid purchase price may result in an incorrect
calculation or recording of depreciation; (4) an invalid depreciation rate may result in an incorrect
calculation of depreciation.

Control Activities
SAP reports of gaps in document numbering are reviewed regularly.