Verification AND Valuation OF Asssets AND Liabilities PDF

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VERIFICATION AND VALUATION OF ASSSETS AND LIABILITIESMEANING OF VERIFICATION-The auditor of a business is required to report in concrete terms that the balance sheet exhibits a true and fair view of the state of affairs of the business. So, he has to examine and ascertain the correctness of the mone...

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VERIFICATION AND VALUATION OF ASSSETS AND LIABILITIES

MEANING OF VERIFICATIONThe auditor of a business is required to report in concrete terms that the balance sheet exhibits a true and fair view of the state of affairs of the business. So, he has to examine and ascertain the correctness of the money value of assets and liabilities appearing in the balance sheet. This is known assets verification of assets and liabilities. Thus, verification means to prove the truth about and the correctness and authenticity of assets and liabilities. In the case of London oil storage co. Ltd. vs Sear Hasluck and co... (1904), it was held that it was the duty of an auditor to verify the existence of assets stated in the balance sheet and that he will be liable for any damage suffered by the client if he fails to do so. Very often, vouching and verification are considered to be one and the same thing. But it is not so. There lies a clear line of demarcation between the two. Vouching is to examine the correctness and the authenticity of the transactions recorded in the books of prime entry, while verification is to confirm the value of assets and liabilities as shown in the balance sheet. Vouching is a continuous process and done throughout the year, while verification is done at the end of the year. Vouching generally based on documentary examination, whereas verification is based on both documentary and physical examination. Vouching is carried on by junior staff from audit party, while verification is done by auditor himself.

Objectives of verification of assets and liabilities1. To ensure that the assets and liabilities shown in the balance sheet actually exist. 2. To satisfy the auditor that the assets and liabilities are properly valued. 3. To ensure that they are properties of the business and as such, they are free from any charge mortgage. 4. To see that assets and properties are properly classified such as fixed assets, current assets, intangible assets. 5. To detect fraud and check the arithmetical accuracy of posting.

Verification of assets and auditors’ duty On an analysis, it can be held that in verification, it becomes the primary duty of the auditor to satisfy himself in regard to the existence, ownership and value of the assets. So also, for liabilities, he has to check the nature and extent of their amount due on the day of balance sheet. Current assets like cash, bill, receivable, investments etc, should be inspected by the auditor by examining them personally on the balance sheet data. He should also thoroughly check easily convertible assets in one sitting. He should note down its number and date on other particulars in his audit book. If a portion of them are pledged or sent to some bank

etc, for inspection, a certificate to that effect should be obtained from the inspection, a certificate to that effect should be obtained from the institution concerned....