Verification and Valuation - Concepts and Differences

Verification

Meaning and Definition

Verification means the procedures normally carried out at the year end, to confirm the

ownership, valuation and existence of items at the balance sheet date. In simple words verification means, ‘proving the truth or conformation.’

“The verification of assets implies an enquiry into the value, ownership and title,

existence and possession, and the presence of any charge on the assets.” - Spicer and Pegler

Valuation

Meaning and Definition

Valuation means to set the exact value of an asset on the basis of its utility. Valuation forms an important part of the everyday audit. It is because the accuracy of the balance sheet depends much upon how correctly the estimation of the value of various assets and liabilities has been made. Both overvaluation and under- valuation of assets and liabilities would exhibit the wrong picture of the financial affairs of a concern. The auditor has to see that the assets and liabilities appearing in the balance sheet have been exhibiting their proper value i.e. neither they have been overvalued or under- valued.

General principles regarding :

Verification :

Confirm that the assets were in existence on the date of the balance sheet.
Ascertain that the assets had been acquired for the purpose of the business and under proper authority.
Confirm that owner ship of the asset rests with the organization.
Ascertain that no charge has been created on the asset.
Ensure that the current book value of the asset is determined after providing correct amount of depreciation for various years.
Ensure that values reflect current physical condition of the asset.
Ensure that disclosures regarding assets are adequate.

Valuation :

The value of a business is defined only at a specific point in time.
The market commands what the proper rate of return for acquirers is. ...
The value of a business may be impacted by underlying net tangible assets. ...
Value is influenced by transferability of future cash flows. ...
Value is impacted by liquidity.

Comments

Financial statements & analysis

Financial statements & analysis Financial statements are written records that convey the business activities and the financial performance of a company. The financial statements are used by investors, market analysts, and creditors to evaluate a company's financial health and earnings potential. The three major financial statement reports are the Balance sheet Income statement Cash flow statement Financial statements are often audited by government agencies, accountants, firms, etc. to ensure accuracy and for tax, financing, or investing purposes. Sources of financial information To effectively evaluate the financial performance of the business requires financial information from three sources: a balance sheet, an income statement and a cash flow statement. Balance Sheet A balance sheet is a statement of assets, liabilities, and capital of a business or an organization at a particular point in time, detailing the balance of income and expenditure ov...

6 Enemies of human development

1.Lust Lust is a psychological force producing intense desire for an object, or circumstance fulfilling the emotion while already having a significant other or amount of the desired object. Lust can take any form such as the lust for sexuality , love, money, or power. It can take such mundane forms as the lust for food as distinct from the need for food. Religions tend to draw a distinction between passion and lust by further categorizing lust as an immoral desire and passion as morally accepted. Lust is defined as immoral because its object or action of affection is improperly ordered according to natural law and/or the appetite for the particular object (e.g. sexual desire) is governing the person's intellect and will rather than the intellect and will governing the appetite for that object. In Hinduism, in the Bhagavad Gita , Lord Krishna , an Avatar of Vishnu , declared in chapter 16, verse 21 that lust is one of the gates to Naraka or hell. In Sikhism , lust is counted ...

Difference between Vouching , Verification and Valuation

Difference between Vouching , Verification and Valuation Vouching Verification Valuation Meaning Vouching is a process of comparing the entries in the books of accounts with the bonafide vouchers Verification is a process which proves the existence, ownership and title to the assets Valuation is a process which certifies the correct value of the assets and liabilities at the date of balance sheet. Subject Matter Vouching is made of the entries recorded in the books of original entry and their posting in the ledger Verification on the other hand is made of assets and liabilities appearing in the balance sheet at the end of the year Valuation is also made of assets and liabilities appearing in the balance sheet at the end of the year By whom Vouching is done by the senior auditor and audit clerks. Verification on the other hand is done by the auditor himself or his associates Verification on the other hand is done by the auditor himself or his associates When Vouching is done...

Wocop

Search This Blog