Question

Why might the authorization to dispose of fixed assets being issued by the user of the asset be a potential concern?

A) Because users are always well-informed about the market value of fixed assets.
B) Because user perspectives might be biased, and they may not consider overall organizational needs.
C) Because users have the final say in all financial decisions related to fixed assets.
D) Because it simplifies the disposal process without any potential drawbacks.

Answer 1

The correct option is B). Allowing asset users to authorize the disposal of fixed assets is concerning due to the possibility of biased decisions that may not align with the broader needs of the organization, leading to potential financial losses.

Step-by-step explanation:

The authorization to dispose of fixed assets being issued by the user of the asset can be a potential concern because user perspectives might be biased, and they may not consider overall organizational needs. Users having the authority to dispose of assets might prioritize their individual preferences or immediate convenience without adequately assessing the asset's remaining useful life, potential resale value, or strategic importance to the broader company operations. This can lead to suboptimal decision-making and potential financial losses for the organization.