Fixed assets represent a significant investment of public dollars for local governments and public authorities. Items that constitute fixed assets are tangible in nature and normally have a useful life of at least two years. Commonly used classifications of fixed assets are land, buildings, equipment, and vehicles. Maintaining control of fixed assets is a function of the entire organization, not just the accounting department. To maintain financial control of fixed assets from an accounting perspective, a locality must properly report their value on its annual financial statements.
External auditors review fixed assets records and internal controls during the annual audit.
They issue an unqualified audit opinion if the general-purpose financial statements present fairly, in all material respects, the financial position of the organization. This type of audit opinion is extremely important to staff, managers, council members, investors, and creditors. External auditors issue a qualified audit opinion if they find that the financial statements are inadequate in a material respect. Lack of control over fixed assets is one of the primary causes for receiving a qualified audit opinion. Items of insignificant value are simply expensed in their year of purchase.