Connect with us Fixed Asset Verification Services (India)
Physical verification of fixed assets refers to the independent process of physically inspecting, identifying, and reconciling fixed assets with accounting records to confirm existence, ownership, and condition.
It is a systematic process in which an auditor physically inspects and validates the actual existence of tangible assets, as fixed assets appearing in books may not physically exist.
What Happens If Physical Verification Is Not Performed?
Failure to conduct physical verification may lead to CARO qualifications, audit observations, misstated financials, and weak internal control reporting.
To ensure your financial statements are accurate, the auditor must report whether management of eligible companies has conducted physical verification of inventory at reasonable intervals. Any material discrepancies (10% or more in aggregate for each class of inventory) must be reported.
At Mercurius, our approach to verification involves conducting a line-by-line reconciliation of fixed assets accounting records with assets identified during the physical inventory process.
Why is physical verification of Fixed Assets mandatory?
Physical verification of the asset is mandatory for two main reasons:
- Statutory Requirements: Companies must comply with the Companies Act, which often requires physical verification to ensure compliance with accounting standards and regulatory rules.
- Auditing Requirements: Physical verification is a crucial part of any independent audit, which ensures that the company’s financial statements present a true and fair view to an organization, as per the auditing standards (IFRS, GAAP, etc).
Which entities require conducting physical verification of assets?
Following is the list of entities that require, and which do not mandatorily require, the physical verification of assets under audit:
| Entity Type | Physical Verification Mandatory? | Governing Law |
|---|---|---|
| Company (Companies Act 2013) | Yes | Companies Act + CARO 2020 |
| Companies (IND-AS / ICFR) | ️Yes (internal control requirement) | ICAI Standards |
| LLP | Not mandatory by law, but recommended during audits | LLP Act + Audit Standards |
| Partnership Firm | Not mandatory | Income Tax + Audit Standards |
| Proprietorship | Not mandatory | — |
| Government Companies / PSU | ️Yes | CAG Guidelines |
When Should Physical Verification Be Conducted?
Physical verification of assets should be conducted at critical stages of a company’s financial and compliance cycle to ensure that asset records accurately reflect their physical existence and condition.
- At Year-End for Statutory Audits: To support statutory audit requirements and ensure compliance with CARO 2020, auditors rely on physical verification to confirm the existence and condition of fixed assets reported in the financial statements.
- Before Mergers, Acquisitions, or Restructuring: Physical verification is essential during corporate transactions to validate asset ownership, identify obsolete or missing assets, and avoid valuation or due diligence risks.
- During Internal Audits and ICFR Testing: Regular verification helps assess the effectiveness of internal controls over fixed assets and supports management’s responsibility under ICFR and IND-AS
- For Multi-Location or Asset-Intensive Operations: Organizations with assets spread across plants, warehouses, project sites, or offices should conduct periodic verification to maintain control, prevent asset leakage, and ensure consistent reporting across locations.
Technology-Enabled Physical Verification of Fixed Assets
We use technology-enabled verification methods to improve accuracy, traceability, and audit reliability during the physical verification process.
- Asset Tagging / Barcoding / QR Codes:
Unique identification of assets to match physical existence with fixed asset registers, helping detect missing, duplicate, or ghost assets. - Location-Wise Asset Mapping:
Verification of assets at their actual place of use across offices, plants, warehouses, and multiple locations, supporting better control and audit clarity. - Audit-Ready Documentation:
Structured reports, reconciliations, and variance analysis aligned with statutory audit, internal audit, and CARO 2020
How can Mercurius help?
To ensure transparency, accuracy, and compliance, we provide independent third-party physical verification of fixed assets for audit, statutory, and internal control purposes. Our experienced professionals follow a systematic approach in conducting physical verification of fixed assets and inventory. As a part of our process, our team will:
- Consolidate physical report for all sites and assets/inventories
- Perform reconciliation between the physical account and the book account
- Compute reference and identify root causes
- Executive summary signed by the technical professionals
- Provide Physical Verification Report
- Physical Verification of Inventory
Our Specialities
- Our professionals bring 17+ years of audit and verification experience
- Pan-India execution with centralized reporting
- Worked with manufacturing, infrastructure, and service companies
- Trusted by audit-liable and multi-location organizations across India.
Our Deliverables
We believe in providing clear, comprehensive, and practical outputs that help management make informed decisions. After completing the verification exercise, our deliverables include:
- Detailed Asset Verification Report
- Reconciliation Statement (Books vs. Physical Verification)
- Highlight of Assets
- Recommendations for better internal controls
- Providing Variance Report
Who should hire us?
Organizations that typically require physical verification services include manufacturing companies, infrastructure businesses, multi-location enterprises, audit-liable entities, and companies undergoing statutory or internal audits.
Schedule a Physical Asset Verification Consultation
Ensure CARO-compliant, audit-ready asset records before your next audit cycle.
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FAQs
Physical verification or observations of fixed assets are referring to the same procedure being used by auditors to verify the existence and condition of assets. Auditors also need to review the counting procedures from before count, during the count, and after the count.
The object of verification is to satisfy the auditor as to existence, ownership, possession (in case of assets) or completeness (in case of liabilities), valuation and disclosure of items mentioned in the balance sheet
- To find out the ownership and title of the assets.
- To find out whether assets were in existence.
- To maintain internal compliances of the entity
- To detect frauds and errors, if any.
- To find out whether there is an adequate internal control regarding acquisition, utilization and disposal of assets.
Following are the asset audit techniques:
- Asset Physical Existence
- Purchase Asset for Business
- Asset Ownership
- Correct Asset Evaluation
At MAS, we assist you with consolidate physical report for all sites and assets / inventories, perform reconciliation between physical count and book count, compute difference and identifying the reasons, executive Summary (signed off by Technical, SCM, Finance, MAS), provide Physical Verification Report and provide physical Verification of assets/ inventory.
