Counting the Assets and Keeping the Evidence

Somebody walked round the building last year with a printout and ticked things off. You are fairly sure of it. Nobody can find the printout, nobody wrote down what did not tick, and the person who did the walking has a clear memory of it being fine.

None of that is evidence, and the frustrating part is how close it came to being evidence. The walking was the expensive bit. The paperwork that would have made it worth something is perhaps forty minutes of additional effort, on the same day, by the same person. Existence evidence is cheap to produce while you are standing in front of the asset and impossible to produce afterwards, because afterwards the question has changed from what is here to what was here, and only one of those can be answered by looking.

Two things this is not

It is not an audit procedure and this firm does not perform audits, reviews or compilations. Nothing here is done on anyone’s behalf but the company’s. What you are building is your own record of what you own, kept because a lender, an insurer, a buyer, a practitioner or your own successor will ask, and because the register is worthless if nobody has ever checked it against the world. If the person who reports on your statements chooses to attend, observe or perform their own procedures, that is their engagement and it runs on their terms, not on this checklist.

It is not the inventory count. Inventory is stock you intend to sell, it is counted for valuation as much as for existence, and it has cut-off consequences that capital assets do not. Companies with both frequently try to run one exercise, and the result is usually a capital asset count squeezed into the end of a long day by people who are already tired. Run them separately. The capital asset count is smaller and it can be done a few weeks earlier, which is an argument for doing exactly that.

Before the day

Six things, and the first one is where most counts are already lost.

Print the register as at a stated date, and freeze it. No additions, no disposals, no edits to it until the count is closed out. A register that moves during a count produces differences that cannot be attributed to anything.
Decide what you are counting this year. Everything, or named zones. Either is defensible. What is not defensible is deciding as you go.
Split the register by location and by custodian. The count sheets are produced from that split, and if the register has no location field then this exercise is going to double as the pass that populates it.
Get tags, or a tagging plan. An asset with no tag is identified by its serial plate, which means somebody has to crawl behind it. Tag as you go and next year is half the work.
Tell the custodians in advance, and tell them what happens to an exception. A count sprung on a department produces defensiveness, and defensiveness produces assets that are suddenly located in a colleague’s office.
Decide the disposition rules before you find anything. Below. Deciding them while holding an exception is how a count turns into a negotiation.

The count sheet

Produced per zone, printed, and carried. Digital is fine if the device works everywhere in the building, which in a warehouse it frequently does not.

Column	Filled by	Why it is there
Asset number and tag	Pre-printed from the register	The link back
Description, make, model	Pre-printed	So the counter is looking for the right thing
Serial number	Pre-printed, and confirmed at the asset	The one field that proves it is this asset and not a similar one
Expected location	Pre-printed	The claim being tested
Found: yes or no	Counter	The whole point
Actual location, if different	Counter	Most exceptions resolve here
Condition: in use, idle, awaiting repair, or unusable	Counter	Feeds a question about the register that finance cannot ask from a desk
Serial confirmed: yes or no	Counter	Distinguishes “I found something that looks right” from “I found this asset”
Counter’s initials and the date and time	Counter	The signature that makes the sheet evidence rather than a note
Verifier’s initials	The second person	See below
Notes	Either	Where the useful information actually ends up

Then, at the bottom of every sheet and not only at the end of the count: total lines on this sheet, lines found, lines not found, and lines found that were not on the sheet. A sheet that does not foot is a sheet somebody stopped filling in halfway.

Leave blank rows at the end of each sheet. They are for the second direction, below, and a sheet with nowhere to write an unlisted asset is a sheet that will not record one.

Who counts what

One rule and it survives every size of company, and it is the same separation that runs through every other control set worth installing: the person who is responsible for an asset does not confirm its existence on their own. Not because anybody is suspected of anything. Because a custodian confirming their own custody produces a record that says nothing, and everybody who reads it later knows that.

Situation	Workable arrangement
A small office, one location	Finance counts, the custodian accompanies and answers questions. Both initial the sheet.
Several departments, one building	Departments count each other’s zones. It takes an hour longer and it removes the problem entirely.
A warehouse or a shop floor	The operations lead counts with somebody from finance, because half the exceptions need a person who knows what the equipment is and the other half need a person who knows what the register says.
Several sites	A local person counts, someone from head office verifies a sample of what they counted, and the verification is recorded as its own line rather than folded into the count.
Assets held by individuals: laptops, phones, tools, vehicles	Confirmed by the individual, in writing, against a list sent to them, and countersigned by their manager. Not by finance, who cannot see them.
One person finance function	The owner walks the highest value zone personally. It is an hour and it is the only version of independence available.

The last row is not a compromise to feel bad about. A company with one finance person cannot manufacture segregation, and the honest answer is to put the one independent pair of eyes it does have on the part of the register where it matters most.

Count in both directions

This is the instruction that separates a count that finds things from a count that confirms what somebody already believed.

Register to floor. Take the sheet, find the assets. This direction finds assets that are gone: disposed of and never removed, stolen, scrapped, left at a closed site, gone home with somebody who left.

Floor to register. Walk the zone and look at what is in it, then check whether each thing is on the sheet. This direction finds assets the company owns and has never recorded, and it is the one almost everybody skips because it feels like the same walk twice.

It is not the same walk. Unrecorded assets arrive through channels that finance does not see: acquired with a business, financed so that no purchase invoice ever existed, built in-house from parts, bought on a card by a department that coded it to supplies, or delivered as a replacement under a warranty claim. Every one of those is invisible from a desk and obvious from the floor.

If time forces a choice, do register to floor across everything and floor to register in the two zones with the most equipment. Do not do the second direction nowhere, because then the count can only ever confirm the register and never correct it.

Exceptions

An exception is any line that does not resolve on the day. Log it immediately, on a single list, in this shape.

Field	Note
Asset number and description	From the sheet
What was expected and what was observed	Written as two statements, not as a conclusion
Zone, counter, date	Provenance
Disposition, assigned on the day	One of the four below
Owner and due date for resolution	An exception with no name resolves itself into next year’s exception
Outcome, and the date it was resolved	Filled in later, and the log is not closed until every row has one

The four dispositions, decided before the count so nobody is inventing them under pressure:

Located elsewhere. Found in another zone. Correct the location field, no further work.
Disposed of, unrecorded. Somebody knows it went. Record the date, the method and any proceeds, and hand it to the register rebuild. The accounting consequence of a disposal in a period already reported on is a question for your accountant, not a decision for the count.
Temporarily off-site. In for repair, at a customer, on a job, with a subcontractor. This needs a document, not a recollection: a repair ticket, a delivery note, a signed acknowledgement. An asset that is off-site with no paperwork is not an exception that has been resolved, it is an exception that has been explained.
Not found. Nobody can account for it. This is the row that matters and the one people are most tempted to reclassify into row three at four in the afternoon. Leave it as not found, with a name and a date, and let it be resolved properly or not at all.

Count the rows in category four and track the number year over year. That count is a control indicator in its own right, and it is far more informative than any amount attached to it.

The memo

The count sheets are the record. The memo is what makes them usable by somebody who was not there, and it is written the same week, not the following quarter.

One page, and it says:

The date and the scope. Which zones, which classes, and what was deliberately excluded and why.
The method, in three or four sentences. How the register was frozen, that both directions were walked, and how independence was arranged.
Who counted, who verified, and who supervised.
The totals. Lines counted, lines found, exceptions by disposition, and unlisted assets found.
What was still open at the date of writing, with owners.
The reconciliation back to the register, and any adjustment proposed as a result, marked clearly as proposed rather than posted.

Signed by whoever ran it and by the owner or the finance lead. Filed with the count sheets and the exception log, dated, in the same place every year, and referenced from the year end file so that anyone who asks the existence question is handed a folder rather than a conversation.

The reason to write the last two bullets carefully is that the memo is the document that gets read by outsiders. A memo that records eleven exceptions and how each was handled reads as a company with a functioning process. A memo that records none reads as a count that was not really performed, whatever the truth is.

Cadence

Everything, every year, is the tidy answer and it is not the right one for most companies at this size. A rolling programme works better and it holds up perfectly well provided the rotation is written down and followed.

Category	How often	Why
High value items, and anything pledged as security	Every year, without exception	These are the ones an outside party will ask about by name
Mobile and portable assets: vehicles, laptops, phones, tools	Every year	Highest attrition, and they leave with people
Anything at a site the company is closing or has recently opened	On the change, not on the schedule	Assets move during a site change and the record never keeps up
Fixed plant and heavy equipment that cannot leave the building	On a rotation across two or three years	It is not going anywhere, and confirming that annually buys very little
Fully written down assets still in use	On the same rotation, and they stay on the register	An asset with no book value is still an asset, and removing it from the register because it is fully depreciated is how a company loses track of half its equipment

That last row is a habit worth breaking deliberately. Assets that carry no value get dropped from registers on the reasoning that they no longer affect anything. They affect the insurance schedule, the replacement plan, the disposal record and every conversation with a buyer.

The parts that get missed

The count is only as complete as the places you walked, and the register is only as complete as the channels finance can see. Four categories sit outside both.

Assets with employees. Confirmed by list and signature, as above. A leaver checklist that includes equipment return is the control, and most companies discover they do not have one during a count.

Assets at customers or subcontractors. Loaned equipment, tooling, containers, demonstration units. These need a written confirmation from the holder, obtained the same week, and a register field that says where they are.

Assets at a location nobody thinks of as a location. Storage units, a vehicle used as a mobile workshop, the owner’s garage, a small remote office. Every one of these has held equipment somebody had to go and find, in every count that ever went looking.

Assets that belong to somebody else. Equipment on loan from a supplier, items under a financing or lease arrangement, and anything owned by a related entity. These are counted, because they are in your building and you are responsible for them, and they are flagged as not owned so that they never drift onto the register. The lease and financing side of this is a discovery problem of its own, set out in finding every lease.

What happens next

The count feeds three things and then it is finished.

The register gets corrected for locations, conditions and unlisted assets found, which is the operational half and is yours. The disposals and any unrecorded additions go to your accountant with the dates and the documents, which is the determination half and is theirs; if the register itself is being reconstructed, they arrive as part of the rebuild package. And the exception log stays open until every row has an outcome.

Then the whole folder goes into the year end file, where it answers one of the questions on every request list a practitioner issues; a first review engagement sets out what the rest of that list looks like. That is the point of the exercise, and it is worth restating because it is easy to lose sight of in the middle of a warehouse: none of this is done so that finance feels better about the register. It is done so that when somebody asks whether the assets on your balance sheet exist, the answer is a dated folder with signatures in it, produced in ten seconds, rather than a description of a walk that somebody remembers taking.

What we do not do

We do not perform audits, reviews or compilations, and we do not design a count to satisfy anyone else’s procedures. What the company builds here is its own evidence. Whoever reports on your statements decides independently what they need.

We do not accept a count sheet with no signature, no time and no footing, because an unsigned sheet is a photocopy of the register with ticks on it.

We do not let an unresolved exception be reclassified as located because the day is ending.

And we do not remove an asset from the register on the grounds that it is fully depreciated. It comes off when it leaves the building, with a date and a reason, and not before.

Counting the Assets, and Keeping the Evidence That You Did