Analysis Internal Control In Order To Design Standard Operating
Procedure (Sop) For Fixed Assets Procurement And Management
Activites: Case Study on PT ABC
Triyanda Agustin Ginting and Siti Nurwayuningsih Harahap
Department of Accounting, Faculty of Economic and Business, University Indonesia, Jakarta, Indonesia
Keywords: Control Activity, Fixed Assets, Fixed Assets Procurement and Management Activities, Identify Risk,
Internal Control.
Abstract: This research aims to analyze internal control system and propose a design of standard operating procedures
(SOP) for fixed asset procurement and management activities in PT ABC. This is a qualitative research with
case study method at PT ABC which is engaged in rental fixed assets for supporting education facilities. We
have interviewed the management of PT ABC, conducts observation, and analysis internal documents.
Based on those data, we analyze the internal control system that has been implemented by PT ABC related
with procurement and management activities of fixed assets, including identifying risk in those activities as
the basis for the analysis of the ongoing internal control system. The results show that there are some
weakness on internal control system, especially related to fixed assets management activities. Therefore,
some risks have not been mitigated yet. In addition, the Company has not formalized internal control
procedure yet, which caused unstructured implementation. Therefore, this research provides
recommendation for improvement in internal control activities and proposed a design of standard operating
procedure (SOP) related to procurement and management activities of fixed assets that tailored with the PT
ABC needs.
1 INTRODUCTION
Companies use assets as one of the resources to
support the company's operational activities in order
to achieve company goals. Fixed assets are generally
important for to the company due to its significant
value and long-term usage to achieve company’s
goals. Based on Indonesian GAAP 16 (IAI, 2014)
states that property, plant and equipment are held for
use in the production or supply of goods or services,
for rental to others, or for administrative purposes
and expected to be used for more than one period. In
addition to its value, information related with assets
are important for both companies and stakeholders
for decision-making. Lansiluoto, Jokipii, Eklund
(2016) stated in their research if firm does not have
effective internal control, it is possible that the
firm’s financial statement contains a material
weakness. Hence, it is critical for management to
have and establish appropriate policies and controls
surrounding fixed assets. With appropriate policies
and controls, it is expected that the company will
have a reliable financial statement with no material
misstatements in fixed assets.
PT ABC engaged in education services, (school
operated under foundation) for children under 3
years old (early childhood education) up to 18 years
old (high school), with market share is middle to
upper class families. Until now school has 6 (six)
branches (later call as site) in Jakarta and 1 (one)
branch in Surabaya with total student reaching 1,500
students. One of the services is rental fixed assets for
supporting education facilities at XYZ foundation.
PT ABC is act as a holding and record all fixed
assets and receive fee payment from XYZ
foundation in the form of rental fee.
Assets remain important for PT ABC because
fixed assets play a significant role in business
activities, have a material value (65.58% of total
assets of PT ABC in 2016), and the value of fixed
assets is used as the basis for calculating rental fees.
The rental fee is based on the fair value of total fixed
assets, with tariff charged based on agreement is 4%
from total fair value of fixed assets. The business
364
Ginting, T. and Harahap, S.
Analysis Internal Control In Order To Design Standard Operating Procedure (Sop) For Fixed Assets Procurement And Management Activites: Case Study on PT ABC.
In Proceedings of the Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study (JCAE 2018) - Contemporary Accounting Studies in
Indonesia, pages 364-370
ISBN: 978-989-758-339-1
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

process of PT ABC also has an unique characteristic,
which is PT ABC owned the fixed asset then renting
the fixed asset to XYZ Foundation. The procurement
process of fixed assets was done by PT ABC based
on XYZ Foundation needs, while the management
of assets is in the hands of XYZ Foundation.
Therefore, it is important for PT ABC to have
adequate internal control related with fixed asset
procurement and management activities, due to
ineffectiveness in internal control can lead to
inaccurate of total fixed assets. Inaccurate of total
fixed assets may cause a risk that is potential loss of
income for PT ABC, as well as incomplete
information of assets will impact in improper
decision making. Other than that, this is also poses a
potential risk for PT ABC that is fixed assets are not
suitable with the needs of site if the procurement
process is not done properly and loss of fixed assets
or fixed assets more quickly damaged if the XYZ
foundation does not manage fixed assets properly.
Management has plans for expansion by opening
several new schools in several major cities on Java
and Sumatera with foreign investors, with the
nearest project is in early 2018 with opening new
branches in Bandung and Pekanbaru. Through this
expansion the value of the company's fixed assets
will be even greater and the presence of foreign
investment requires the company to be able to
provide reliable financial reports.
With the things mention above, the objectives of
this research are to understand the internal control
system that has been implemented by PT ABC
related with procurement and management activities
of fixed assets, identify risks related to procurement
and management activities of fixed assets PT ABC's
as a basis for internal control analysis of the ongoing
system, and provide recommendation in the form of
proposed a design of SOP procurement and
management activities of fixed assets so that control
activities can run effectively and efficiently.
2 LITERATURE REVIEW
2.1 Internal Control
Committee of Sponsoring Organizations of The
Treadway Commission (2013) defined internal
control as a process, effected by an entity’s board of
directors, management, and other personnel,
designed to provide reasonable assurance regarding
the achievement of objectives relating to operations,
reporting, and compliance. Romney and Steinbart
(2015) stated internal control as the process
implemented to provide reasonable assurance that
control objectives are achieved, including safeguard
assets. COSO’s Internal Control—Integrated
Framework (2013) enables organizations to
effectively and efficiently develop systems of
internal control that adapt to changing business and
operating environments, mitigate risks to acceptable
levels, and support sound decision making and
governance of the organization. Internal control
consists of five integrated framework that is control
environment, risk assessment, control activity,
information and communication, and monitoring.
2.2 Internal Control of Fixed Assets
Control activity of fixed assets can fall into the
several categories (Romney and Steinbart, 2015).
Proper authorization of transaction and activities,
can be done since the procurement process up to
managing fixed assets. authorizations are required
when request for order fixed assets, transfer of fixed
assets, ulitization asset, and write-off fixed assets.
Segregation of duties, done with segregation duties
employee for record, custody, receive, and buy and
payment the fixed assets. Design and use of
documents and records, ensuring documents or
records used in controlling fixed assets are adequate
and all activities are well documented. Safeguarding
assets, records, and data, done by creating and
enforce appropriate asset policies and procedures,
maintain accurate asset records of all assets, restrict
access to assets, and protect records and documents.
Independent checks on performance, done with
regularly perform physical check.
There are two essential elements of internal
control when we are dealing with Property, Plant,
and Equipment (PP&E). One is knowing what you
are supposed to have, which is the purpose of the
fixed-asset register or master file. The other is being
able to locate the actual assets, to provide assurance
that the property register represents what is
physically present (King, 2011).
One of control activities to achieve the
company's goal is to have the design and use of good
documents and records (Romney and Steinbart,
2015). One form of documentation is to have a
standard operating procedure (SOP). Standard
Operating Procedure (SOP) based on United States
Environmental Protection Agency (2007) is a set of
written instructions that document a routine or
repetitive activity followed by an organization. The
development and use of SOPs are an integral part of
a successful quality system as it provides individuals
with the information to perform a job properly, and
Analysis Internal Control In Order To Design Standard Operating Procedure (Sop) For Fixed Assets Procurement And Management
Activites: Case Study on PT ABC
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facilitates consistency in the quality and integrity of
a product or end-result.
They document the way activities are to be
performed to facilitate consistent conformance to
technical and quality system requirements and to
support data quality. SOPs are intended to be
specific to the organization or facility whose
activities are described and assist that organization
to maintain their quality control and quality
assurance processes and ensure compliance with
governmental regulations (United States
Environmental Protection Agency, 2007).
Dini (2013) in her research, do analysis
effectiveness internal control of fixed asset
management in North Jakarta Administration City
Government, that using COSO criteria and Peraturan
Pemerintah No. 60/2008 tentang Sistem
Pengendalian Intern Pemerintah as well as the
PERMENDAGRI No. 17/2007 tentang Pedoman
Teknis Pengelolaan Barang Milik Daerah as a
valuation guide. The results show that the
implementation of the internal control system in
general is quite good but not as effective as it still
has weaknesses. the difference with previous
research is researcher not stop in provide
recommendation for weaknesses in internal control
but also provide recommendation in the form of
proposed design of standard operating procedure.
3 RESEARCH METHODOLOGY
3.1 Research Methods
This research is a qualitative research with case
study approach. Qualitative research is multi-method
in focus, involving in interpretive, naturalistic
approach to its subject matter. This means that
qualitative researchers study things in their natural
settings, attempting to make sense of, or interpret
phenomena in the terms of the meanings people
brim to them (Wahyuni, 2015). This method is
choose due to this research is aim to gain deeper
understanding of the process or experience or
phenomena from a person or group that occur in the
field then make conclusion of the pattern or
phenomenon that occurs. Other than that, qualitative
research is choose due to data that researcher use for
processing data is not numerical data, but using data
from observation, interview results, analysis
documents.
This research is case study approach on fixed
assets procurement and management activities at PT
ABC in consideration total fixed assets is use as
basis for calculation rental fee, which is this rental
fee is income for PT ABC. Income is an important
aspect because it affects the going concern of an
entity. Thus, the researcher considers that this
research will give a large enough impact for the
object of research.
Data collection method that use in this research
are observation, interview, and analysis internal
documents. Observation was conducts in Head
Office and site Serpong (choose because has the
biggest total fixed asset). Researcher get a chance to
know how the management of fixed assets done,
such as the process of receive fixed assets, delivery
fixed asset to other site, and how safeguarding asset
run head office and site. Interview conducts to know
business environment and business process of
company and components of internal control for
procurement and management activities of fixed
assets PT ABC, which allows new questions to gain
a deeper understanding. Interviews conducts by the
researcher involve general affair general manager,
general affair manager, procurement manager,
finance staff and some general affair site staff.
Researcher also analyze Company’s internal
documents to know the adequacy of documents.
3.2 Unit Analysis
The procurement and management activities of fixed
assets PT ABC was involve the General Affairs
department. General affair department divided into
general affair head office (in PT ABC) and general
affair site (under XYZ Foundation and located in
every school/site). General affair site is responsible
to general affair head office (PT ABC) related with
the fixed assets management activities in each site.
Procurement activities involves ordering fixed
assets, supplier or vendor selection, and receiving
fixed assets process. Management activities of fixed
assets involves recording fixed asset, transfer fixed
asset, disposal fixed asset, receiving assets from
donors, and monitoring fixed assets process.
3.3 Data Analysis
Research is carried out with understanding the
business environment and business processes of the
company by doing interview with management PT
ABC. To gain deeper understanding related with
fixed asset procurement and management activities,
researcher conducts interviews with people from
general affair department such as general affair GM,
GA and procurement manager and GA staff and
other department that related with general affairs
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
366

such as finance staff. Research analyze internal
documents to determine the adequacy of documents,
whether it is in accordance with the needs of fixed
asset procurement and management activities
Then researcher make analysis related with
company's internal control system using the COSO’s
internal control framework, including identifying
and analyzing the risks associated with the
procurement and management of fixed assets,
analyzing ongoing internal control system and
provide recommendation of existing internal
controls weakness.
4 RESULT
4.1 Internal Control Analysis on Fixed
Asset Procurement and
Management Activities at PT ABC
Components of internal control to be tested include
the control environment, risk assessment, control
activity, information and communication, and
monitoring.
1. Control Environment.
Researcher do the analysis where the criteria
examined are management’s philosophy and
operating style, commitment to integrity and ethical
value, organizational structure, assigning authority
and responsibility, and policy and practice of human
resource development. The results show that vision
and mission Company not written in any media and
employees are not aware of their role in terms of
internal control. Therefore, researcher provide
recommendation to including vision and mission in
the employee guidebook. Also, Company provides
an overview of internal controls, the importance of
internal controls for the company and what role
employees should do in order for internal controls
proceed effectively. Including control activities as
one of the employee performance appraisal points.
2. Risk Assessment.
Researcher do the analysis where the criteria
examined are establishment of overall company
objectives, goal setting at level activity, risk
identification, risk analysis, and risk management.
The results show that Company not yet do identify
and analysis risk, assessment risk and manage risk.
Therefore, researcher do identify and analyze risk, to
help Company to start doing risk assessment.
3. Control Activity.
researcher do the analysis where the criteria
examined are proper authorization of transaction and
activities, segregation of duties, safeguard assets,
accurate and timely recording of transaction, control
over management information system,
documentation of transaction, and activities
independence check of performance, and training
employee. Following were weakness that associated
with criteria that mentioned above:
Tabel 1: Problem Identification and Recommendation
Control Activities
Problem
Identification
Recommendation
Site coordinator not
routine in making
"pertanggungjawaban"
report, can be delayed
up to 2 weeks
GA department must be
routine in making an
"pertanggungjawaban"
report (at least once a week,
adjusted with the frequency
of receipt goods) and give
penalties or punishment if
treporting exceeds the
specified time.
General affair and
finance department
never reconciles fixed
asset data
Perform reconciliation
(check and balance)
between GA and finance at
least once a month.
Company has not yet
applied technology
information system in
recording fixed assets
Begin to use information
systems technology to
record the assets of PT
ABC. This system can be
purchased or built alone
(depending on the maturity
of the company's IT) and to
be effective must be
integrated with all
procurement and asset
management activities.
Transfer of assets
(borrowed or
permanently
transferred) is not well
documented.
Transfer of assets whether
borrowed (temporary) or
transferred (permanent)
must have clear procedures,
with supporting documents
and approved by the GA
Director/GM.
General affair never
informs the finance
department for assets
that permanently
transferred or
disposed.
Inform finance for transfer
or disposal assets, therefore
fixed asset in finance
always update. This can be
done by regularly perform
reconciliation between GA
and finance. Provide
punishment if it fails in
performing its duties
(informing disposal).
Company does not
have a regular
schedule for physical
checks.
Company has a fixed
schedule for physical
checking of fixed assets
head office and site, at least
Analysis Internal Control In Order To Design Standard Operating Procedure (Sop) For Fixed Assets Procurement And Management
Activites: Case Study on PT ABC
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annually.
4. Information and Communication.
Researcher do the analysis where the criteria
examined are information and communication and
form and tools communication. The result show that
Company does not have standard operating
procedure, therefore researcher provide propose
design of standard operating procedures (SOPs) for
fixed assets procurement and management activities
at PT ABC with the aim of providing guidance to
employees and facilitate employees in carrying out
their duties.
5. Monitoring.
Monitoring is an evaluation to assess whether each
element of internal control has been implemented
and functioning as it should. The results show there
are fixed assets that directly send to site without re-
checking from GA head office. Therefore,
researcher provide recommendation that require GA
to re-checking fixed assets sends directly to site, at
least for fixed assets that have a material nominal
and have regular schedule to perform physical
checks.
4.2 Risk Assessment and Control Activity
Analysis on Procurement and
Management Activity of Fixed
Assets PT ABC
Based on internal control analysis above, Company
never conduct risk assessment. Therefore, researcher
do risk assessment in order to help Company. Risk
assessment start with identify risk that related with
fixed asset procurement and management activities,
then researcher determine ideal control activities for
those activities. Researcher then compare current (on
going) control activities with the ideal control
activities, for those activities that find doesn’t have
proper control activities, researcher will provide
recommendation.
Based on analysis, there are several activities that
find not have proper control activities, for those
weaknesses researcher provide recommendation,
please find below:
Table 2: Recommendation Control Activity for
Procurement and Management Activity of Fixed Assets
PT ABC
Analysis (Risk and
Current Control
Activities)
Recommendation
Risk: kickbacks.
-There are no job rotation
rules and obligation to
take holidays or leave in
procurement department.
Obligation to take holiday
or leave as Company
rules.
Analysis (Risk and
Current Control
Activities)
Recommendation
Risk: Receive assets not
accordance with the
specifications.
-Not all sites receive
purchase order from head
office, seldom based on
verbal info from head
office.
Copy of purchase order
must be given to the site
(if the goods are directly
received at the site).
Risk: Mistake in
accounting.
-Not all sites receive
purchase order from head
office, seldom based on
verbal info from head
office.
Risk: Loss of fixed
assets.
-For items received
directly on site, head
office never performs
physical checks.
GA department should be
routine in making
"pertanggungjawaban"
report (at least once a
week, adjusted with the
frequency of receipt
goods) and give penalties
or punishment if
reporting exceeds the
specified time.
Risk: Records of fixed
assets are not accurate.
-Company still using
excel to record assets.
-Never done checks and
balances process.
-Started using technology
information systems to
record the assets of PT
ABC, integrated with all
procurement and
management activities of
PT ABC's fixed assets.
- Routinely perform
check and balance assets
between GA and finance.
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
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Risk: Assets are lost and
asset records are not
accurate.
-Not all fixed assets that
come out from site are
issued delivery order.
-Transfer of fixed assets
between sites is not
documented (no special
documents, only verbally
or via email) and not
communicated to the
finance department.
- Authorized verbally by
GA GM.
-Transfer of fixed assets
either borrowed
(temporary) or transferred
(permanent) must have
clear procedures, with
supporting documents
and approved by GA
Director/GM.
- Establish standard
operating procedure
(SOP) related to
management activities of
Company's fixed assets.
Analysis (Risk and
Current Control
Activities)
Recommendation
Risk: Records of fixed
assets not accurate.
-The write-off of fixed
assets (discarded, sold, or
donated) is not
communicated to
finance.
- The removal of fixed
assets (discarded, sold,
donated) that still have
book value must first
obtain GM Finance
approval and all removed
assets must be
communicated to the
finance department to
update the company's
fixed asset records.
- Establish standard
operating procedure
(SOP) related the
management activities of
Company's fixed assets.
Risk: Records of fixed
assets not accurate.
-GA does not have a
fixed schedule to perform
physical checks.
-Not all fixed assets
companies have tagging
and number assets in
each site has a different
format (not
standardized).
-Company has fixed
schedule for physical
checking FA head office
and site, at least annually.
-All of the company's
fixed assets must have
tagging (sticker or
barcode) and number
assets on each site should
be standardized.
- Establish standard
operating procedure
(SOP) related to
management activities of
the Company's fixed
assets.
4.3 Proposed Design of Standard
Operating Procedure (SOP) for
Fixed Asset Procurement and
Management Activities at PT ABC.
Based on internal control and risk assessment
analysis above, the Company does not have internal
control that is formalized therefore the procurement
and management activities of fixed assets are still
running not effectively. Therefore, researcher
provide proposed standard operating procedure
(SOP) and related documents that can support the
smooth those activities.
Researcher proposed 7 (seven) design standard
operating procedure related with fixed asset
procurement and management activities, that is
procurement fixed asset, utilization fixed asset,
stocktaking fixed asset, borrow fixed asset, transfer
fixed asset, retirement fixed asset, and loss fixed
asset.
Each proposed SOP is design with PT ABC needs
and consist of:
1. Approval of SOP by top management and related
senior management.
2. Objective and scope.
3. Responsibility, stated people or department that
responsible for those process.
4. Definitions, identifying any acronyms,
abbreviations, or specialized terms used.
5. Conditions, explain definition and classification
of fixed assets and authorization for each
process.
5. Process, explanation for each process.
6. Flowchart, showing the step or workflow that
explain in process.
7. Documents related process, stated documents
that needs for each process.
Based on analysis on transfer assets process it is
found that this process is not documented well
enough, therefore researcher also design documents
related to borrow and transfer asset.
5 CONCLUSION
Based on the results of the analysis and discussion
that has been discussed in the previous section, it
can be concluded that PT ABC already has internal
controls related to procurement and management
activities of fixed assets but internal controls are still
not formalized and still found some problems in the
implementation of such control. For any weaknesses
that found in the internal controls, the researcher
propose recommendation.
Based on the results of risk analysis related to
procurement and management activities of fixed
assets PT ABC still found some risks that have no
control activities.
Based on the results of risk analysis and control
activities, researcher provide proposed design of
Analysis Internal Control In Order To Design Standard Operating Procedure (Sop) For Fixed Assets Procurement And Management
Activites: Case Study on PT ABC
369

standard operating procedure (SOP) related to
procurement and management activities of fixed
assets that tailored with PT ABC needs.
Research has several limitations that are the
evaluation of internal controls focuses on
procurement and the management activities of fixed
assets PT ABC and does not cover the entire system
of PT ABC and the proposed standard operating
procedure (SOP) is limited to procurement and
management activities of fixed asset.
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