After physically verifying more than 10 lakh assets across 1500+ locations in India, one finding kept repeating itself.
Yet even organisations with a well-maintained Fixed Asset Register typically could not physically locate 10–15% of the assets recorded in their books.
And at companies without a register, the gap could not be measured at all — because there was no baseline to verify against.
This article shares our physical asset verification findings from 250+ projects across India” across 250+ physical asset verification projects — the patterns, the causes, and what they mean for CFOs, auditors, and finance teams preparing for a fixed asset audit. All findings are drawn from real projects; client identities have been fully anonymized.
Our Physical Asset Verification Findings at a Glance
- Assets verified: 10 lakh+
- Locations covered: 1500+
- Projects completed: 250+
- Typical unfindable assets (with FAR): 10–15%
- Largest IT asset gap observed: ~25% (400 of 1,600 assets)
Equally important: physical verification confirms the existence and condition of the large majority of assets. For most companies, the exercise is as much about gaining confidence in the reliability of the Fixed Asset Register as it is about finding what is missing.
The Benchmark: 10–15% of Book Assets Are Typically Unfindable
Across our projects, companies holding a maintained FAR still typically show a physical verification gap of 10–15%.
The assets exist on paper — with values, depreciation schedules, and audit sign-offs. The physical item simply cannot be located.
These are often referred to as ghost assets — items that remain in accounting records despite no longer existing physically. They may inflate the recorded asset base and affect depreciation records until identified and appropriately accounted for.
They also increase the effort involved in fixed asset reconciliation, because finance teams often need to investigate years of historical movements before concluding whether an asset was transferred, disposed of, or genuinely lost.
Two anonymized examples from recent projects:
- A large IT services company (Pune campus): physical verification of fixed assets against a maintained FAR found 500–600 assets missing. The register was current, the processes existed on paper — the assets were not there.
- A mid-sized company’s IT asset verification: of 1,600 IT assets in the register, around 400 could not be found — a 25% gap, concentrated in laptops and end-user devices.
These are not unusual results. They are representative of the range we commonly observe across industries.
Where Do the Missing Assets Go?
When we investigate variances with client teams, the most common explanations are:
- Employee exits: laptops and devices issued to employees who left, never recovered, never written off. In more than one project, devices were still marked “issued” to employees who had resigned long before the verification took place.
- Scrapped but never removed: assets physically disposed of years ago that continue to sit in the books and accumulate audit sign-offs
- Unrecorded transfers: assets moved between offices, floors, or branches without any movement record — present somewhere, findable nowhere
- No explanation at all: a meaningful share of missing assets have simply gone cold — no trail, no record, no answer
The last category is the most uncomfortable finding for management, and often one of the reasons organisations decide to commission an asset verification exercise in the first place.
The Bigger Problem: Companies With No Register at All
The 10–15% benchmark only applies where a FAR exists to verify against.
A growing category of businesses has no asset register at all — and they are often the fastest-growing, most asset-heavy businesses we work with.
Case: a hostel chain across five cities. The company operates around 18–19 hostels across Delhi, Gurgaon, Mumbai, Bangalore, and Mangalore. Assets worth several crores were invested in beds, furniture, electrical systems, air conditioners, and kitchen equipment — but there was no Fixed Asset Register. No asset counts, no location-wise records, no category-wise breakup. Only balance-sheet totals.
This meant management knew the total asset value — but could not identify what actually existed at each property.
Our engagement inverted the usual process. Instead of verifying books against reality, we built the asset register from physical reality: field teams tagged every asset found at every property, and balance-sheet category values were then distributed across the assets that physically exist.
Case: a managed office space operator. The same pattern, different industry. The company takes buildings on rent, equips them fully as corporate-style offices, and rents them to companies. Rapid expansion, heavy capital in fit-outs — furniture, electricals, air conditioning, IT infrastructure, pantry equipment — and no asset register behind any of it.
Case: a national retail footwear chain. Around 2 lakh assets tagged and verified across the client’s 700+ store network — a single-client engagement that exceeds the total operational scale of many verification firms. The scope covered store fixtures, IT infrastructure, POS equipment, and store-level operational assets. Tagging teams were sequenced city-wise across the network to complete the rollout in a defined timeframe.
The pattern across both: businesses that expand fast rarely build asset records while expanding. The FAR becomes a problem to solve later — usually when an audit, an investor, or an insurance claim forces the question.
What Categories Dominate the Gaps
Across rental and facility-heavy businesses, the categories that dominate both value and record-keeping gaps are consistent:
- Furniture and fixtures
- Electrical installations
- Air conditioning units
- IT equipment
- Kitchen and pantry equipment
In corporate environments, the pattern shifts toward IT and critical operational assets — where individual values are higher and movement is constant.
A Variance Case: When the Gap Reaches the Balance Sheet
In one project for an agri-machinery manufacturer, the client’s systems showed 19,134 assets. Physical verification could confirm 15,112.
The reconciliation exercise surfaced a variance of over ₹10.5 lakh — differences that had accumulated silently across years of purchases, transfers, and disposals that never made it into the records consistently.
The value of the exercise was not the variance number itself. It was that management, for the first time, had a defensible answer to the question every auditor eventually asks: does your Fixed Asset Register reflect physical reality?
“When an asset exists only in the books, it quickly becomes a reconciliation problem waiting for the next audit.”
What This Means for CARO 2020 and Statutory Audits
Under CARO 2020, auditors report on whether physical verification of property, plant and equipment has been conducted at reasonable intervals, and whether material discrepancies were noticed and dealt with in the books.
Depending on the facts and circumstances, an unexplained 10–15% variance may require careful evaluation and appropriate investigation by management and the statutory auditor.
For finance teams, the practical implications are:
- Verification before the audit, not during it. Discovering a significant gap in the middle of a statutory audit leaves no time to investigate and adjust.
- Reconciliation matters as much as counting. Finding assets is half the work; matching findings back to the FAR — and resolving what does not match — is what makes the exercise audit-ready.
- Tagging converts a one-time exercise into a system. Untagged assets drift back into chaos within a few years. Tagged assets stay verifiable.
What Companies Can Do
Based on what we see in the field, the highest-value steps are:
- Establish the physical baseline. If no reliable FAR exists, build it from the ground — tag what exists, then reconcile values.
- Verify at reasonable intervals. Annual or cyclical verification keeps the gap from compounding.
- Close the exit loop. Employee separation processes should include asset recovery sign-off — laptops are the single most common missing asset category.
- Record transfers. A simple movement register between locations prevents the “present somewhere, findable nowhere” problem.
- Write off what is gone. Carrying disposed assets in the books indefinitely only defers the audit conversation.
The Real Purpose of Verification
Physical asset verification is not simply about identifying discrepancies. It is about giving management a reliable picture of what the organisation owns, where those assets are located, and whether accounting records reflect operational reality. The earlier that process begins, the easier future audits, reconciliations, and business decisions become.
Frequently Asked Questions
What percentage of fixed assets are typically found missing during physical verification?
In our field experience across 250+ projects in India, typically 10–15% of assets recorded in the books cannot be found physically, even at companies maintaining a Fixed Asset Register. Gaps of 20–25% are not unusual in IT asset categories.
What are ghost assets?
Ghost assets are items that remain in a company’s accounting records despite no longer existing physically — commonly caused by unrecorded disposals, unreturned employee devices, and untracked transfers. They may inflate the recorded asset base and affect depreciation records until identified through physical verification and appropriately accounted for.
Why do companies with a Fixed Asset Register still have missing assets?
The most common causes are laptops and devices not recovered from exiting employees, assets scrapped without being removed from the books, and transfers between locations made without movement records. A share of missing assets has no traceable explanation at all.
What happens if a company has no Fixed Asset Register?
Verification is performed in reverse: field teams tag and record every asset physically present, and balance-sheet category values are then distributed across the assets actually found. This builds an audit-ready FAR from physical reality.
Is physical asset verification required under CARO 2020?
CARO 2020 requires auditors to report whether physical verification of property, plant and equipment was conducted at reasonable intervals and whether material discrepancies were appropriately dealt with in the books. Regular verification with FAR reconciliation supports this reporting requirement.
How often should physical verification of fixed assets be done?
A reasonable interval depends on asset volume and movement, but annual verification — or a cyclical program covering all locations over a defined period — is the common approach for audit readiness at Indian companies.
