Fixed Asset Audit: Validating the Core Security
For a lender, the Fixed Asset is the primary security for any Term Loan. At Diwakar and Associates, we provide a clinical inspection to ensure that the assets being financed have not been sold, moved, or damaged, and that their depreciation is being calculated accurately.
Why, When & Where is it done?
- Why : To prevent "ghost assets" on the books, identify unauthorized disposal of collateral, and ensure the bank's charge (mortgage/hypothecation) is physically visible on the asset.
- When: Conducted annually as a mandatory compliance measure, or specifically during the "disbursement phase" of a Term Loan to verify the arrival of new machinery.
- Where: Performed across all factory sites, administrative offices, and project locations where the bank’s funded assets are located.
- What is it Done: Physical tagging (Barcoding/QR), verification of Serial Numbers, and cross-referencing with purchase invoices and the Fixed Asset Register.
Applicability Limits (The Numbers)
Term Loan Exposure
Any borrower with a Term Loan or Asset-Backed Finance of ₹1 Crore or more.
Asset-Heavy Industries
Entities where Fixed Assets constitute more than 50% of the total asset base.
Internal Control Standards
Companies governed by Companies (Auditor's Report) Order (CARO), which mandates physical verification of assets at reasonable intervals.
How we provide this service at Diwakar and Associates
We secure the integrity of your asset-backed portfolio through a rigorous four-stage verification process:
1
Physical Verification & Tagging
Our team visits every location to physically sight the assets. We apply unique identification tags (or verify existing ones) to ensure that the "Asset ID" in the books matches the "Asset on the Floor."
2
Ownership & Title Verification
We scrutinize the original purchase invoices, Bill of Entries (for imported machinery), and registration documents to confirm that the borrower holds a clear legal title.
3
Technical Health & Valuation Assessment
We record the current condition of the asset (Working/Idle/Obsolete). If the machinery is idle or poorly maintained, we alert the bank, as this directly reduces the "Realizable Value" of the security.
4
Reconciliation & FAR Update
We reconcile our physical findings with the Fixed Asset Register (FAR). We identify discrepancies such as missing assets, assets not yet capitalized, or assets that have been scrapped without informing the bank.
The Impact
We perform physical verification, tag assets for tracking, and reconcile the ground reality with the Fixed Asset Register (FAR).
Our Commitment to You
Accuracy is the cornerstone of our practice. At Diwakar and Associates, we commit to providing an "Uncluttered Ground Reality." We promise to identify any mismatch between your financial records and the physical assets, ensuring your Term Loan security is robust and fully accounted for. Our goal is to give your risk team the confidence that the assets on paper are the assets on the floor.
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