Vouching checks transactions; verification and valuation check assets and liabilities shown in the balance sheet. Auditor ensures that items are:
Exam tip: always write the key checks: existence, ownership, valuation, and disclosure.
Verification is the process of confirming the existence, ownership, and authenticity of assets and liabilities appearing in the balance sheet.
It answers: “Does this asset/liability really exist and belong to the business?”
Valuation is the process of determining the correct value of assets and liabilities in the financial statements.
It answers: “Is it recorded at the correct amount as per applicable accounting principles?”
Objectives:
Auditor should check:
Auditor ensures:
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Verification checks existence and ownership of assets/liabilities, while valuation checks whether they are recorded at the correct amount.
Both ensure balance sheet items are not overstated or understated.
Objectives (any five):
Thus they support a true and fair view.
Financial auditing is the process of examining an organization's (or individual's) financial records to determine if they are accurate and in accordance with any applicable rules (including accepted accounting standards), regulations, and laws.
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Vouching checks transactions; verification and valuation check assets and liabilities shown in the balance sheet. Auditor ensures that items are:
Exam tip: always write the key checks: existence, ownership, valuation, and disclosure.
Verification is the process of confirming the existence, ownership, and authenticity of assets and liabilities appearing in the balance sheet.
It answers: “Does this asset/liability really exist and belong to the business?”
Valuation is the process of determining the correct value of assets and liabilities in the financial statements.
It answers: “Is it recorded at the correct amount as per applicable accounting principles?”
Objectives:
Auditor should check:
Auditor ensures:
Key checks:
Checks:
Checks:
Checks:
Checks:
Checks:
Verification checklist (flow):
Existence → Ownership → Possession → Valuation → Disclosure
Quick balance sheet item checks:
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Verification confirms the existence, ownership and authenticity of assets and liabilities shown in the balance sheet, while valuation ensures they are recorded at the correct amount.
Existence → Ownership → Possession/Charge → Valuation → Disclosure
Thus both are essential to prevent overstatement/understatement in balance sheet.