The SARBOX Implications of Ghosts and Zombies

Sarbanes- Oxley is certainly all-pervasive in US business, but now it seems to gaining a distinctly spiritual dimension too! That doesn't mean you should hire a medium for your accounting team, but rather be aware of the implications SOX will have when it comes to fixed asset tracking. The current attention on the accuracy of the balance sheet and a possible move to further disclosures about the fair value of assets means that US companies will have to get serious about internal controls over fixed assets in the next few years.

Asset tracking software speeds up what is an otherwise is time consuming job and if done thoroughly and professionally these packages allow you to determine the fair value of assets that you can find and inspect, provided you can indeed find them! "Ghost Assets "and "Zombie Assets" will be the next major focus for Sarbanes-Oxley Compliance software. And rightly so, since in many cases, "Ghost or Zombie Assets" can be as high as 15% of a firm's total Property, Plant and Equipment (PP&E) when a detailed inventory is taken. "Ghost Assets" are on the books, but appear to have vanished from the real world, while "Zombie Assets" are present physically but have nothing in the accounting records to support the fact that they do indeed exist.

Once auditors are satisfied that your internal controls are working in other areas, their emphasis is bound to switch to PP&E as evidence that you really are implementing a sound internal control system. That will require some investment, as required entries to the property ledger will need to be readily identifiable, whether through barcode scanning or the alternative of RFID asset tracking. Using RFID technology, it's easy to take an inventory provided all the assets have been properly tagged and reconciled.While the initial cost for RFID tags may seem relatively high compared to manual or barcode systems, the potential cost savings in reconciling physical inventories to the books is substantial and could more than justify the initial outlay.Besides which, they are still probably less messy than hiring an exorcist or getting in Wesley Snipes to do his "Blade" thing!

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