Content Filtration 6. Whether all assets and liabilities are mathematically accurate or not. The purpose of verification is to determine the health of financial statements. N.B. An inventory or schedule of all items is prepared at the time of stock-taking and each item is valued on one of the accepted principles as discussed above and such a schedule is usually certified by an engineer or other expert, a director, manager or high official for authentication. Accounting Standard AS 10 issued by the Institute of Chartered Accountants of India provides that the revalued amount of a fixed asset should be shown in the finan­cial statement by restating both the gross book value and the accumulated deprecia­tion to give the net revised book value, or by restating the net book value by adding the net increase thereof. In some cases a distribution of the borrower's assets over time is considered as a way to establish ability to repay the loan… Verification is usually conducted through examination of existence, ownership, title, possession, proper valuation and presence … That work is usually done either by a responsible officer of the business or by some independent and expert valuer and, in such circumstances, an auditor’s re­sponsibility is confined to the acceptance of certificates of value from the management or the valuer, as the case may be, subject, of course, to suitable personal inquiries made by himself to establish that the values appear to be reasonable having regard to the nature of the business and of the assets or liabilities concerned. If, however, any of these liabilities is expected to cause an actual loss, adequate reserve should be provided for the same. Verification methods: It is not possible to detail the procedures for verifying all possible liabilities. Valuation and Verification of Particular Assets: Subject to the general principles of valuation and verification discussed above an auditor should always take into full consideration special points in regard to the valuation … 2. Particularly look out for overdue pay­ments. The purpose is to certify ownership. There is an element of uncertainty about this group of liabilities, which may or may not occur. This is as important as valuation of assets, if not more; because the balance sheet should include only such items as are genuinely owned by the clients and an auditor should never pass an asset unless he is fully satisfied about the bona fide ownership of the same by his clients. Verification includes apart from (except) valuation “the examination of ownership right, the existence of the assets in business & its freeness from any mortgage”. In case of fixed deposits, deposit receipts from the bank should be seen; if such receipts are pledged, certificates from pledgees should be obtained. (5) Check payments against partly paid shares. The precise applications of the aforesaid criteria for ascertaining cost or market value of different groups of stock items are indicated in the undernoted table: Physical ex­istence of stock items represented by the stock figure in the balance sheet is usually verified by actual annual or half-yearly stock­taking arranged by the management and necessary reconciliation is made with book figures as per bin cards or store ledger accounts. Last year, the Securities Exchange Commission (SEC) adopted Rule 506(c) of the Securities Act of 1933, which, in a major departure from prior securities practice, allowed the use of general solicitation and general … (6) Mention in report insufficient provi­sion, if any, for any contingent liability. Standards procedures are used to verify that a company really owns the assets it claims to own. Any such change.is made in an asset which is not shown in the Balance Sheet. If balance sheet incorporates the incorrect assets… Objectives Of Verification Whether all assets and liabilities are mathematically accurate or not. Physical verification shall also include possession of assets andverification of title deeds of Land & Buildings and assets … (4) Check bills receivable book with entries in bank pass book. (c) Auditor’s position re: stock-in- trade: ‘It is an accepted principle that an auditor is not a valuer of stock as he is not supposed to possess expert knowledge re­garding the nature and utility of various stock items nor is he in a position to count or verify the physical existence of each and every item of the inventory, particularly in the case of a big manufacturing or trading concern holding a large variety of items in stock. or not. Terms of Service 7. written down value according to the policy on amortisation or fair value of benefits enjoyable on future. 2. Before uploading and sharing your knowledge on this site, please read the following pages: 1. to ascertain the existence of assets. As additional meas­ure an auditor may secure from the client’s solicitors, legal advisers or tax consultants particulars of pending suits, claims, appeals etc. He should be thoroughly satisfied that they have been prop­erly valued or revalued on scientific princi­ples so as to represent their true and fair worth to the business at the date of the balance sheet. The standard methods of valuation that are usually followed in respect of different classes of assets are enumerated below: Stable in nature. There are three key properties of an asset: 1. It is confirmed that assets are free from any charge of lien. Sometimes a system of depositing the closing cash balance with the bank on the closing date and withdrawing the same on the next day may be followed when the bank pass book will provide the only reliable source of verification. General principles regarding verification 1. The maturity of any contingent liability may arise from either acquisition of asset or incurring of loss. Verification of assets means substantia­tion of the actual existence of assets under the legal ownership and/or possession of the clients on the date of balance sheet. (c) Carefully check goods inward and out­ward books and also purchase and sales records for the last week or so of the accounting year under audit with a view to finding out any purchase and receipt of material that may not have been included in the stock list, or any sale that may have been included although cor­responding goods have not been actu­ally delivered to the consumer. The Balance Sheet will reveal the true and fair view of the state of affairs of the business concerns only when the liabilities as well as assets are properly valued and verified. (f) Compare percentage of gross profit on turnover with previous year’s figure and enquire about any abnormal fluc­tuation. related to the assets. 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