Report to Sandra
Re: Controls over Non-Current Assets
By: HD

Introduction

The purpose of this report is to evaluate the business’s procedures over controls laptops and to make recommendations so that the business will have better control over non-current assets.

Importance of Internal Controls

Non-current assets are those assets acquired by the business for the purpose of earning revenue, rather than for the purpose of resales. Some of these assets are often called “property, plant and equipment” and are usually kept for longer than one accounting period. These assets come at a considerable expense to the business, so they require adequate controls to be implemented to protect them. A suitable control system includes procedures addressing the following issues:
• Purchasing of assets
• Administrative controls
• Property, plant and equipment register

Acquisition of Assets

It is pleasing that initial purchase of 10 laptop computers was properly authorised. However, Amanda had no authority to purchase extra 3 computers. While Amanda purchases three computers, she might not obtain the entire best offers and There is no mention as to whether the new computers are the same as the original ones purchased in terms of performance, reliability and repair costs, etc. The business usually extends the warranties of the computers within three years just in case if there is any problem with it. The three computers that Amanda bought has not been record in the systems and it doesn’t mention whether the company had paid for it yet. Also, there are no documents for proof of owner ships. When purchasing any assets, the PPE register is required to a business. Principally, the control aspect serves to protect honest employees and identify those who responsible for theft, misuse of judgement.

Identification of Assets

It is of concern that there is no record of the number of laptop computers owned by the business. It must be records and have correct value to calculate depreciation as accurately as possible as this will affect profit/loss. The serial numbers should be recorded and engraved on items and must be identify which computers it is belong to.

Asset Storage and Security

Laptops are valuable and due to their size easily stolen if not kept in a secured area (ie an area able to be locked). Sign on door insufficient. Insurance companies may not pay claim for theft if they are not stored in a secure area. Procedures need to be implemented for when employees are issued with the laptop computers. This should also include reminders on how they should look after these valuable assets. ie they shouldn’t be left in the backseat of a car as this is very visible and enticing to people wishing to misappropriate these items. It is of concern that the employee didn’t report theft immediately as the business would need to notify the insurance company immediately and they would probably want to see a police report verifying theft from vehicle.

Disposal

The correct procedures need to be implemented when disposing of a laptop computer. Employees don’t have the authority to sell their computers to friends. Obviously this practice would not