Continuing with our series focused on ways to alleviate the burden of audit preparations, Part 3 deals with using your procurement system to capture as many different types of spending as possible. One way we recommend accomplishing this is to Track Spending on Assets in Real Time.
Assets are always going to be part of audits. These items represent large values on the balance sheet, so auditors want to ensure that the amounts are correct for valuations, depreciation, and disposal of these high-dollar items.
Tracking all invoices for the construction of assets, as well as repair and maintenance throughout the year is key to streamlining audit preparations and properly assessing value of assets. If invoices are not located in a central repository, it proves to be a tedious and cumbersome task to pull invoices and approvals together for every asset to determine if the proper dollar amount has been assessed. But if transactions for assets are being logged as activities happen, you’ll be much more productive in
- Accurately depreciating the value of assets that continue to be carried on the balance sheet
- Assigning value to assets being disposed of and removed from the balance sheet
- Locating data for auditors later.
The best way to capture this information is to track spending on assets in a cloud-based procurement software solution to create a data warehouse for your asset spending, including information related to:
Invoices, Payments, and Capital Appropriations – When auditors send clients a Capital Appropriations Request (or CAR) to serve as a population from which the audits will test, clients are often in a rush to collect all of the information to meet the auditors’ request. If the CAR is completed in a paper format, information will need to be scanned or manually retyped in an Excel document to send to the auditors. The process becomes much more streamlined when this information is tracked through a procurement software system that can generate reports related to service requests, invoices, payments, and capital appropriations.
Additions – Auditors typically ask for all of the invoices that build up to a fixed asset addition, and then choose a percentage of those invoices to validate. Tracking this information electronically will make it easy to identify all of these invoices. They will also usually request the largest invoices first – a system makes sorting invoices by dollar amount a simple task.
Transfers – Audit requests usually include information about where assets have been located and where each piece is currently. By tracking the movement of assets from one place to another in real time through procurement software, you can always be sure you are giving auditors the most up-to-date information about where items are located. This also instills confidence that the information you provide is complete and accurate.
Disposals – Logging data in real time will automatically collect proof of sale, money received, and book balance, and make it easier to calculate gain/loss for assets.
To hear Verian’s own Assistant Controller Brian Pocek elaborate on this best practice and offer case study evidence from his personal experience working as an auditor and in the finance industry, download the full on-demand webinar and stay tuned for Part 4 of this series.
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