Verification - BZU PAGES: Find Presentations, Reports, Student's Assignments and Daily Discussion; Bahauddin Zakariya University Multan

**usmanstar** · #1 11-06-2011, 01:36 PM

Verification

It means to prove the fact and confirmation about the both sides of the balance sheet as the assets and liabilities. The auditor not only checks the accuracy of the accounts in the arithmetic way but also check the existence of the actual items and their actual possession.
Advantages of Verification

1. Use of Assets
The merit of the verification is to check that management had used the assets of the business properly. Through verification the auditor can find out if the management has misused the assets. By the verification the efficiency of the business is improve because it is used properly for the business purpose only.

2. True and Fair View
By the verification the auditor can show the facts of the business. For the report the auditor has to depend upon the verification technique as well as on the other techniques.

3. Protection of Lenders
For the lender also it is beneficial, because the auditor has to check the ownership, existence and the possession and valuation of the business assets. So the tender can rely upon this report.

4. Risk for Creditors
As the auditor accounts provide the true and fair view about the affair of business so it is also the protection for the creditors. The creditors are those who provide the goods and services to the business. And for them the risk of loss is eliminated.

5. Location of Assets
Through the verification the correct view about the assets of the business can be find out. The auditor can visit the assets personally. He can cheek that the assets are not stolen or destroyed. So the auditor beings the fair view about the assets.

6. Performance of Management
The verification is also very useful for the owners, because by the verification the auditor can check the performance of the management. So the management can improve the efficiency of his work.

7. Loan Arranged
The verification is also helpful for the protection of the life of the business. Through verification the assets are physically examined and these assets are used to take the loan from the financial institution, which save the life of the business.

8. Manipulation of Accounts
The verification is also very useful to check that there is no manipulation of accounts and the figure are not altered. It is the moral check on the management, which shows the true position of the business.

9. Embezzlement
The merit of the verification is also that there is no embezzlement. The management cannot misuse the stocks or cash or any other asset and cannot use them for their personal use. So, the fair view of the statement can disclose.

10. Recording of Assets
The assets are recorded in a proper way and manners. For the writing of all the information of the sale, purchase and depreciation and other records. The GAAP (general accounting accepted principals) are used. The auditor has to check that the rules are followed.

11. Valuation of Assets
The verification is also helpful for the valuation of the assets properly. The assets may be fixed or floating. So the valuations of these are also made in different ways. The auditor can check the valuation of the assets through the accounting principals.

12. Stability of Business
Another benefit of the verification is that it is also helpful in the disclosure of the true position of the assets and liabilities. In the balance sheet the fictitious assets and liabilities are usually recorded. The business is considered stable when the real assets are in excess over the real liabilities. On the other hand it is not stable. So the verification discloses the facts.

13. Liabilities Valuation
The verification is also helpful for the owner by the verification they can come to know about the business. Which must be valued under the accounting rules.

14. Proper Disclosure
It is also useful for the public. The true valuation and the position of the assets and liabilities are disclosed and the public can come to know the proper position of the business.

15. Business Resources
There are many powers, which have a vital role in the running of the business as the man, machine material and also money. In fact it is the deriving forces of the business. So, the reasonable rate of return puts on them. In this way also the verification is helpful to determine the true value of profit.

Objects of Verification

The object of verification of assets is the satisfaction by the auditor as to its existence, proper disclosure, proper valuation and correct ownership on the balance sheet. The following are the main objects of the verification.

1. Certify the Ownership
The object of verification is to certify the ownership. The document deeds, vouchers and agreements etc can obtain the real ownership.

2. Position of Assets
The audit by the verification of the assets in the business the assets may be mortgaged or pledged for borrowing money. The auditor has to check that the same has been written in the balance sheet in the proper way.

3. Existence of Assets
The object of the verification is to ascertain the existence of the assets. The existence of assets is stated in the proper but there may be the assets be sold, stolen or destroyed. In this case the auditor has to check the assets physically.

4. Detect Fraud
Another purpose of verification is to find out the frauds if conducted. In come cases the assets may be stole or misused. The auditor can verify the real position of assets. The responsibilities of fraud are to be the management.

5. Verify Possesssion
The purpose of verification is to check the possession of the assets. The assets should be safeguarded the assets of the business is used for the business only. The possessions of the assets are in the management.

6. True and Fair View
Another object of the verification is to determine the true and fair view about the business financial statements. After the verification it is confirmed that the financial statements are according to the requirements and is fact.

7. Depreciation Plans
Another purpose of the verification is the examination of the depreciation of assets of the business. The auditor has to check that the proper state the depreciation is charge on the assets according to the accounting principal. As the life of each assets is different, so the depreciation is charged as per rule.

8. Valuation of Assets
The object of the verification is also to check the assets valuation. Which does the management value. The auditor has to fine that the valuation is true and according to the accounting principal.

9. Valuation of Liabilities
The management determines the valuations of the liability. The object of verification is to check that the valuation is the true and according to the accounting principals.

10. Evaluation Methods
The object of the verification is to the check the methods of evaluation. To evaluate the recorded items the compliance and substantive test are applied. According to the business requirements the auditor can rely upon anyone method from above.

11. Recording Methods
The object of the verification is to determine the method of recording of the both sides of the balance sheet as the assets and liabilities. The auditor has check that all types of assets recorded separately and the depreciation is deducted and the value of asset is charged according to the rule.

12. Internal Control
To evaluate the internal control is also the object of the verification. The business management is efficient if the internal control is effective. And if the internal control is not effective the assets cannot be used properly.

13. Arithmetic Accuracy
Another object of the verification is to note down the arithmetical accuracy of the balance sheet. All the recording of the transactions, their posting of totals, sub-totals, addition and depreciation must required the calculation. The auditor has to require the accuracy of the figure work.

14. Treatment of Items
The object of the verification is to check that the different items have been treated correctly as the treatment of the taxes and discount etc.

15. Current Period
The object of verification is to check that the transactions of the business are related to the current year for which the audit work is being done.

Techniques of Verification

In the process verification following techniques are used

1. Physical Existence of Assets
Verification techniques of an asset are to check the physical existence of the asset. The auditor can count, measure and also the inspect of the various assets.

2. Proper Disclosure
It is also the techniques of the verification that the auditor has satisfied himself that the management has disclosed all the assets and the liabilities as required by law.

3. Ownership of Assets
Another technique of the verification is to determine the ownership of business. The assets must be held in the name of the business.

4. Assets in Possession
In the technique of the verification the auditor has to check the possession of the assets, which are in the custody of the management. It is in the possession of the cashier and the stock in trade is in the fold of the store officer. The auditor has to check the custody of different employees.

5. Proper Valuation of Assets
The technique is also to check the valuation of an asset. The assets may be fixed or circulating. The auditor can check the valuation of assets, which are determined by the management. In this case the arithmetical accuracy can be examined.

6. Valuation of Liabilities
Auditors should also satisfy themselves about the liabilities that these are properly valued, which are shown on the balance sheet, overstated or understated liabilities do not give a true picture about the financial position.

7. Correct Valuation
Auditor should pay special attention to this point, because profit and loss account also depends upon the accuracy of valuation of assets and liabilities. Valuation main object is that balance sheet should show a true and correct view about the financial position of a client firm.

8. Purchase By Proper Authority
Another technique of the verification is that The Auditor satisfied himself that there is a proper authorization for any acquisition or disposal or any other form of movement for the assets and liabilities which is stated in the articles and memorandum of association.

9. Business Motive
Keeping in mind the business motive, the auditor has to be satisfied himself that all the assets, which are purchased are for the business motive only and not for the use of personal requirements.

10. Charge Free
The technique of verification is the examination of charge on assets. In case of lend the loan the assets are transfered in the name of the lender the auditor has to check that the assets are free.