Faculty of business department of accounting an assessment of fixed asset managementin the

SUMITION APPROVAL SHEET
This paper has been submitted for examination with my approval as university advisor
Name: Getahun, G. 
S ignature_______

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CHAPTER ONE
INTRODUCTION
1.1. Background of the Study
Globally fixed asset management industry has finally returned to a growth to achieve the goal of 
the specific organization (William: 2008:521). The continuing fast growth of fixed asset 
management solutions and specification confirms a structural and shift in all governmental and 
nongovernmental organization (Henry: 2009:9).
Fixed assets management is an important accounting process that seeks to track fixed assets for 
the purpose of financial accounting, preventing maintenance and theft deterrence (Tay:2009:P1). 
The council of Ministers financial regulation of Ethiopia, No 17/1997 provides a definition of 
fixed assets as a means of assets coasting birr 200 or more than it is operational use and that has 
a useful economic life of more than one year (MoFED: 2007:8). Fixed assets do not contain cash 
or other assets that are responsibly expected to be converted into cash, sold or consumed by the 
firms within their operating cycle (Singh: 2010:1).
Fixed assets with finite useful life will gradually lose their value over time because of age, wear 
or market conditions. Due to the fact to maintain the effective utilization of fixed assets (Horn: 
2012:3) claimed that a good system of internal control over fixed asset will help to detect 
accidental mistake that may result in the preparation of inaccurate and misleading financial 
information.
Fixed asset management is affected by an entity ‘s board of directors, management and other 
personnel designed to provide reasonable assurance regarding the achievement of objectives of 
the organization in three fundamental categories (1) effectiveness and efficiency of operations 
(2) reliability of financial reporting (3) compliance with applicable laws and regulations.
Addis Ababa University was established at 1950 E.C. It is the oldest and largest higher education 
institute in the country. The Organization has 14 campuses which are found in Addis Ababa. 
AAU is also one of non-profit making governmental organization having different fixed assets 
for its day to day routine operation (http//www.aau.edu.et/ 2,11,2013 ). In order to attain the
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goal of the organization, fixed asset management has become essential for both management and 
auditing activities. Having no adequate and appropriate internal control over fixed asset is a 
major problem to the operation of every organization (Domnisoru and Vinatoru: 2008:8).
Previous studies are conducted in both private and governmental organization regarding to fixed 
asset management. Our study focused on internal control over fixed asset of Addis Ababa 
University. The reason for doing this study is to investigate and identify the problem area of 
internal control over fixed assets, and to know the strength and weakness of AAU in relation 
with FAM.