Verification of assets:
General principles of Verification of assets:
It is not sufficient for the auditors only for Verification of assets and correctness of the amount of assets shown in the balance sheet, he must verify them by actual inspection or otherwise and establish the existence and Verification of assets.
Points requiring auditor’s attention for Verification of assets are as under:-
- Cost:- In regards to Verification of assets, the verification pressure need not generally be extended to determination of the correctness of costs and authority to incur costs unless the items concerned were purchased during the accounting period under review. In such cases the auditor should check the correctness of costs through normal vouching method. He should ensure that adequate distinction has been made between revenue and capital nature of costs for the Verification of assets.
- Ownership:- Where ownership of assets is evidenced by document of title etc. as in case of immovable property, a reference should be made to such documents. If the documents are held by third person, the auditor should obtain a certificate directly from the party or arrange to expect them at the third party’s place of business.
- Valuation:- It must be ascertained that Verification of assets and valuation of assets should be done in accordance with the appropriate accounting policy. For the valuation of assets made, the basis must be consistently applied, unless circumstances require it to change.
- Existence:- Physical inspection of assets is required and it should be done wherever possible. Where physical inspection is not possible, the possibility of obtaining indirect evidence would be considered e.g. machinery imported held in customs godown or materials sent to sub contractor for a job work or fabrication. In such circumstances certification from such parties should be obtained and if considered necessary physical verification can also be requested.